Scott Nicholas
Fitch Ratings has said U.S. government reimbursements and lower funding requirements can help mitigate cash flow impacts to defense contractors over the next three-to-four years as the companies face large underfunded pension liabilities.
Changes to accounting rules enacted in 2012 will continue to impact interest rates used to calculate pension benefit obligations discount rates and will also affect reimbursements through 2017, Fitch Ratings said Thursday.
Fitch estimated a $17.5 billion total deterioration of industry-wide underfunded pension benefit obligations from year-end 2010 to year-end 2015 even after $28.5 billion in contributions were allotted to pension plans during the period.
Defense contractors are not likely to provide large amounts of discretionary pension contributions in the next four years despite an increase in required contributions for select defense contractures in the next two years, Fitch said.
