You might think the rising stock market is en route to curing what ails Corporate America's pension funds. But many pension plans are actually in worse shape now than last year. By yearend, the companies in the Standard & Poor's (MHP) 500-stock index will be $247 billion short of where they need to be to finance pension obligations to future retirees. That's up from a $225 billion deficit in 2002, according to accounting experts at Credit Suisse First Boston. Moreover, some 340 companies are expected to have underfunded plans by the end of 2003, a small increase from 334 last year.
Why the deterioration? Although stock returns are up, so is the size of most pension obligations. That's because the value of that obligation moves in the opposite direction from interest rates -- and rates moved down this year.
Thanks to a quirk in pension accounting, this year's negative results won't flow immediately to the bottom line. Instead, they'll be averaged with prior years' results and spread over several years. CSFB accounting analyst David Zion figures pension woes are likely to reduce the S&P 500's collective bottom line by $19 billion in 2003, $26 billion in 2004, and $37 billion in 2005. With heftier medical costs heading your way, now's the time to rethink how much to stash in a flexible spending account for 2004.
An FSA lets you save up to $5,000 out of your earnings before taxes to pay medical expenses. But don't just throw money in. You'll lose anything you don't use by yearend. Last year, 5% of the dollars employees put in was forfeited, says Chris Giammona, a health-care consultant at Mercer Human Resource Consulting. Here's a checklist of rising charges to consider:
CO-PAYS For routine in-network visits, they may be going from $10 or $15 to $15 or $20. Specialists might cost $30 or $40. You may also see a new co-pay of $250 to $500 for hospital visits.
DEDUCTIBLES Don't be surprised if these rise from, say, $200 or $250 to $300 or $350.
CO-INSURANCE The percentage of the bill you pay for hospital stays, outpatient procedures, or doctor visits outside a network may go from 10% to 20%, or even 30%.
PRESCRIPTIONS In tiered plans, you might spend $10 or $15 for generics, $20 or $25 for preferred name brand drugs, and $35 to $50 for medications not on the insurer's preferred list.
OVER-THE-COUNTER DRUGS Good news here: Next year, you can be reimbursed for nonprescription medicines from your FSA. But don't try to sneak in non-prescription vitamins or toiletries.
ANNUAL OUT-OF-POCKET MAXIMUM The worst-case scenario may have just gotten worse. The cap for individuals may go from $1,000 or $1,500 to $1,500 or $2,000. That generally doubles for families. Remember, things like deductibles, co-pays and uncovered vision or dental bills may not count toward that cap. If you're ready to move beyond a Butterball this Thanksgiving, consider buying a Heritage turkey. These rare breeds, rescued from near-extinction in recent years by small farmers, trace their bloodlines to wild turkeys from colonial times. When properly roasted, they're richer in flavor and juicier than the commercial varieties you may be used to. Heritage birds, which include the Narragansett, Bourbon Red, Standard Bronze, and White Holland breeds, cost $4 a pound, plus shipping. Order before Nov. 14th from slowfoodusa.org or 212 965-5641.