Fitch Criteria Report: Analysis of U.S. Corporate Pensions.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has published updated methodology on its approach to evaluating pension funds and their credit implications for U.S. corporate issuers. The majority of non-financial U.S. corporates rated by Fitch that have defined benefits plans are currently underfunded un·der·fund tr.v. un·der·fund·ed, un·der·fund·ing, un·der·funds To provide insufficient funding for. underfunded adj → infradotado (económicamente) . As supplemental information, Fitch adjusts several credit metrics for pension liabilities Pension liabilities Future liabilities resulting from pension commitments made by a corporation. Accounting for pension liabilities varies widely by country. and cash outflows to assess potential liquidity concerns due to future funding requirements. This report is generally dedicated to the cash flow analysis that takes place in determining the materiality of future pension contributions on future cash flows. Market variability and regulatory changes can cause unfunded liabilities to vary year-to-year, making the liability less predictive from an obligation standpoint. Fitch's analysis focuses on the cash aspects of pension obligations, recognizing that there can be a wide variance between reported pension expense from the income statement and actual cash contributions, particularly during periods of market volatility. For future pension outflows, Fitch's analysis has always centered on near-term expected minimum funding requirements and the effect on company cash flows and liquidity. With the advent of the Pension Protection Act of 2006 (PPA PPA 1. Palpation, Percussion & Ausculation 2. Pittsburgh pneumonia agent 3. Postpartum amenorrhea 4. Price per accession 5. Pure pulmonary atresia ), Fitch analysts take into account funding requirements as mandated by this legislation. Overall, Fitch believes pension funding requirements continue to be manageable for the majority of companies in its U.S. Corporate coverage universe, with the median funding levels standing at approximately 88% at fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. 2006, compared to 80% for 2005. The full report 'Analysis of U.S. Corporate Pensions' is available on the Fitch Ratings web site at www.fitchratings.com, along with 'The Evolving Pension Landscape' which provides a larger overview of defined benefit plans Defined benefit plan A pension plan obliging the sponsor to make specified dollar payments to qualifying employees at retirement. The pension obligations are effectively the debt obligation of the plan sponsor. Related: Defined contribution plan across U.S. corporates. The updated criteria report provides several hypothetical case studies. Fitch's criteria and report will be updated as necessary depending on changes in the regulatory or accounting landscape. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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