This excerpt taken from the ITT 10-K filed Feb 25, 2009.
Funded Status, Plan Contributions and Other
During the fourth quarter of 2008, we recognized a substantial decline in the fair market value of our employee pension plan assets, contributing to a pre-tax charge to other comprehensive loss of $2.1 billion and a decrease of $1.3 billion in shareholders equity. Further, this decline also contributed to a reduction in the funded status of our U.S. Salaried Pension Plan, which represents approximately 78% of out total pension obligation.
At December 31, 2008, the U.S. Salaried Pension Plan had an unfunded deficit of $1.1 billion. For the balance of our funded pension plans, including foreign and affiliate plans, the aggregate funded status decreased by $274.4 resulting in a net unfunded balance at December 31, 2008 of $222.2. In addition, we had $359.2 in pension plans where funding is
not permitted or, in foreign environments, where funding is not feasible.
Funding requirements under IRS rules are a major consideration in making contributions to our pension plans. With respect to qualified pension plans, we intend to contribute annually not less than the minimum required by applicable law and regulations. In 2008, we contributed $24.1 to pension plans. We currently anticipate making contributions to pension plans in the range of $20 to $25 during 2009.
The Pension Protection Act of 2006 (the Pension Act) contains funding requirements for defined benefit pension plans. The Pension Act establishes a 100% funding target over 7 years for plan years beginning after December 31, 2007. No shortfall amortization payments are required if the pension plan meets the following targets: 92% funded in 2008; 94% funded in 2009; and 96% funded in 2010. The Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) was passed in December 2008. WRERA provides (i) the shortfall amortization charge will be based on the transition percentages (92% in 2008, 94% in 2009, 96% in 2010 and 100% thereafter as opposed to the original PPA language of 100% of funding target, (ii) clarification that the averaging method used to value assets is to be adjusted for expected earnings which results in asset smoothing, and (iii) relief from the restriction on benefit accruals in 2009, by allowing a plan sponsor to use the greater of the Adjusted Funding Target Attainment Percentage from January 1, 2008 and January 1, 2009.
In 2009, we are not required to make any mandatory contributions to our U.S. Salaried Plan to satisfy minimum statutory funding requirements. Further, assuming that actual plan returns are consistent with our expected plan return of nine percent in 2009, interest rates remain constant, and there are no additional changes to U.S. pension funding legislation, we would not be required to make any mandatory contributions in 2010. We may, however, make voluntary contributions over the next two years to improve the funded status of our U.S. Salaried Plan.
Funded status at the end of 2009, and future required contributions, will depend primarily on the actual return on assets during the year and the discount rate at the end of the year. Depending on these factors, and the resulting funded status of our pension plans, the level of future contributions could be material.