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Ford pension plan funding holds steady in 2014

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Ford pension plan funding holds steady in 2014

The funded status of Ford Motor Co.’s pension plans remained unchanged in 2014 as strong investment returns offset lower interest rates, which increased the value of plan liabilities, the big automaker reported Thursday.

At year-end 2014, Ford’s pension plans worldwide were underfunded by $9 billion, unchanged from the prior year. In the United States, the automaker’s pension plans were underfunded by $1.5 billion, compared with $2 billion a year earlier, according to financial reports released by Ford.

Ford also attributed the improvement in its U.S. pension plans to a de-risking program that removed billions of dollars in obligations from its pension plan offered to salaried employees.

Under that program, which was unveiled in April 2012 and closed at the end of 2013, Ford offered more than 90,000 U.S. salaried retirees and former employees the opportunity to take their monthly benefit as a cash lump-sum payment.

About 35,000 plan participants accepted the offer, removing $4.2 billion in pension plan liabilities, the company reported earlier.

Since Ford launched that trailblazing program, several dozen other major employers, including rival automaker General Motors Co., instituted similar annuity to lump-sum benefit conversion programs.

Through such de-risking programs, employers reduce the size of their pension plan obligations, cutting back their exposure to swings in interest rates and investment results that can make it difficult for them to project future contributions.

Ford sharply reduced contributions to its pension plans in 2014, pumping in $1.5 billion, down from $5 billion in 2013. Ford said it expects to contribute $1.1 billion to its pension plans in 2015.

Ford, though, did not disclose its pension plans’ assets and liabilities. Such disclosure will come in several weeks when the automaker releases its 10-K report for 2014.

At year-end 2013, Ford’s U.S. pension plans — including plans covering salaried and union employees and retirees — had a funded ratio of 95.4%, with $41.21 billion in assets and $43.18 billion in liabilities. That compares with a funded ratio of 80.6% at year-end 2012, when the U.S. plans had $42.40 billion in assets and $52.13 billion in liabilities.

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