But now, private employers that still offer traditional pension plans are getting the big shock as they assess how much more it will cost to shoulder retirement obligations.
Among those wondering aloud are accountants at Indianapolis Power & Light's holding company, IPALCO Enterprises.
"Our pension plan assets are currently performing well below the assumed long-term rate of return on plan assets of 7.75 percent. In fact, the financial market volatility may result in a potentially large decrease in the value of plan assets," IPALCO states in its third quarter 10-Q.
IPALCO goes on to say that unless investments in its $400-million-asset pension plan improve markedly before year-end — which seems unlikely — "it will have the effect of increasing our pension expenses and funding requirements over the next several years, which may be material."
Historically, IPL has recovered pension benefits in electric rates.
Private-sector defined benefit plans overall have suffered a nearly $1 trillion decline in value since the market's high on Oct. 9 of last year, according to the Center for Retirement Research at Boston College.
Among S&P 1500 companies, the ratio of pension plan assets to plan liabilities, at 104 percent at the end of 2007, fell to 97 percent at the end of the third quarter, according to consulting giant Mercer.
In dollars, that translates to going from a surplus of $60 billion to a deficit of $35 billion.
Even though these pension plans are long-term in scope, they're required to maintain a certain level of funding under the Pension Protection Act of 2006. Unfunded liabilities must be eliminated over a seven-year period. Companies struggling to do so would have to draft a rehabilitation plan or apply for a waiver from the requirement.
To meet funding minimums of the Pension Protection Act, private-sector employers will have to boost their pension contributions $90 billion in 2009 alone, estimates the center at Boston College.
That's assuming companies can afford it. A number have plans that were already underfunded, and the slow economy presents more pressing operating challenges.
"The incidences of underfunding raise the possibility that some companies may not be able to meet their obligations without placing enormous pressure on the firm," the center said in a report issued this month.
"This challenge raises the question of firms laying off workers, freezing their pensions or going bankrupt."
Increased pension funding for some companies "is going to be a big cash constraint," said Marc Picconi, an assistant professor of accounting and pension expert at Indiana University.
It won't necessarily be evident to investors at first, however.
"You really won't see a tremendously big impact on net income, especially this year," Picconi said, noting accounting rules dating to the 1980s that allow companies to slowly amortize the loss over years, minimizing the jolt to earnings.
Take Eli Lilly and Co., for example. Buried in the section on comprehensive income in its third-quarter 10-Q is the disclosure that it is recognizing $58 million in losses on pension plan investments.
But those losses occurred in previous quarters and aren't reflective of the most recent market meltdown.
"We won't see any impact on our financial statements this year," said Lilly spokesman Mark Taylor. Not at least until the beginning of next year and even then it will be smoothed out over several years, he said. "We see it as a long-term investment."
Not that Lilly has anything to worry about. Its pension plan is overfunded, with assets of $7.3 billion and current obligations of $6.6 billion. The Indianapolis-based drugmaker had already planned to contribute in 2008 about $80 million toward the pension plans to satisfy minimum funding requirements, plus another $100 million in discretionary funding.
IPALCO and other companies that still offer traditional pension plans should be so lucky.
As of the beginning of this year, IPALCO's pension plans were underfunded to the tune of $78 million, with assets of $404 million and obligations of $482 million.
IPALCO made no contributions to the plan last year but did in the first nine months of this year, chopping the underfunded amount down to $32 million on Sept. 30.
The utility company plans to fund a total of $55 million this year to reduce its liability shortfall, "of which $40 million is required to avoid the 'at-risk' status provisions under the Pension Act," the company said in its 10-K report.
That shortfall will be funded over the next seven years.
Just how much more it will cost IPALCO to fund the plan as the result of the market plunge won't be figured until after Dec. 31.
Also making the annual assessment will be big companies such as Indianapolis-based WellPoint Inc. So far this year, the health insurance giant hadn't made any contributions to its pension plan. As of early this year, it was overfunded, with assets of $2.1 billion and obligations of $1.8 billion, according to WellPoint's 2007 10-K.
Last year, the plan had a return on assets of $281 million.
A company's pension costs are based on a complex array of actuarial assumptions. Besides the expected long-term rate of return on pension plan assets — blown to bits by the market plunge — are such factors as expected life of pension plan beneficiaries and what's known as a discount rate, which is used to calculate the present value of accumulated and projected pension liabilities.
As IPALCO noted in a recent earnings report, "any of these assumptions could prove to be wrong."
Picconi noted that the hits companies have taken on their pension plans this year could be further smoothed if the stock market recovers in short order.
In 2007, IPALCO's $404 million in pension plan assets were divided up four ways: 64 percent in equity securities, 25 percent in fixed-income investments, 7 percent in hedge funds, and 4 percent in cash.
One factor in the market tumble that has limited damage to pension plans has been an increase in "high quality" corporate bond yields. An increase in the yield on corporate bonds reduces the present value of plan liabilities.