| Pension Shortfall | |
 A situation in which a company offering employees a defined benefit plan does not have enough money set aside to meet the pension obligations to employees who will be retired in the future. |
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 With a defined benefit plan, the employer bears the risk of the investments in the plan. Therefore, when investments such as stocks perform poorly, a shortfall occurs, meaning there isn't enough money in the pension plan to meet the needs of people about to retire. A company can rectify a pension shortfall by increasing investment returns (usually an unlikely course of occurrence) or putting aside more money into the pension plan, thereby reducing the company's net income. As an example, in August 2002 UBS Warburg reported that General Motors had a pension shortfall of $22.2 billion, equal to 83% of the company's market value. That means, $4 of the first $5 that GM earns per share each year stands to get eaten up by pension obligations. |
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 Analyzing Pension Risk - Determine the risk to a company's EPS and financial condition resulting from an underfunded defined-benefit pension plan. How To Evaluate Pension Risk By Analyzing Annual Costs - Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate. Cooking The Books 101 - To spot the signs of earnings manipulation, you need to know the different ways companies can inflate their figures. Lady Godiva Accounting Principles - Find out how and why these rules can help companies "come clean" in post-Enron Wall Street. Introductory Tour through Retirement Plans - Here you will find tutorials that are each devoted to one the most common retirement plans, explaining how to establish, fund, and then take distributions from it. |
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