unfunded liability on defined-benefit pension plans

There is one more shoe to drop, and it is a biggie. Stock portfolios, individual retirement accounts and 401(k)s have taken dives. The Standard & Poor's 500 Index is down 35% since Jan. 1. There is one more major component of this country's wealth that will not be reported until late February or early March: the unfunded liability on defined-benefit pension plans.

According to the Pension Benefit Guaranty Corp.'s Web site, 44 million Americans are counting on collecting retirement payments from defined-benefit pension plans. The maximum payment you can get from them if your corporation cannot meet its obligation to you is $51,744. If you are an airline pilot, engineer, senior vice president or chief financial officer thinking you will get a $75,000- to $150,000-a-year pension, you may be in for a rude awakening.

There's no reason to think that your pension plan hasn't lost as much as the stock market. From the estimates I've been reading, by the year's end there will be a $200 billion to $250 billion unfunded pension liability that will have to be made up. That will be $250 billion that will be sucked from net earnings of those companies that last and recover, and smaller pensions for the employees that work for a company that won't make it through this recession.

Do not look for the economy to recover until this $250 billion problem has been solved and you begin to see increases in gross domestic product and corporate earnings. The worst may be over, but I don't expect a meaningful recovery before at least the end of next year's second quarter.