What is Big Think?  

We are Big Idea Hunters…

We live in a time of information abundance, which far too many of us see as information overload. With the sum total of human knowledge, past and present, at our fingertips, we’re faced with a crisis of attention: which ideas should we engage with, and why? Big Think is an evolving roadmap to the best thinking on the planet — the ideas that can help you think flexibly and act decisively in a multivariate world.

A word about Big Ideas and Themes — The architecture of Big Think

Big ideas are lenses for envisioning the future. Every article and video on bigthink.com and on our learning platforms is based on an emerging “big idea” that is significant, widely relevant, and actionable. We’re sifting the noise for the questions and insights that have the power to change all of our lives, for decades to come. For example, reverse-engineering is a big idea in that the concept is increasingly useful across multiple disciplines, from education to nanotechnology.

Themes are the seven broad umbrellas under which we organize the hundreds of big ideas that populate Big Think. They include New World Order, Earth and Beyond, 21st Century Living, Going Mental, Extreme Biology, Power and Influence, and Inventing the Future.

Big Think Features:

12,000+ Expert Videos


Browse videos featuring experts across a wide range of disciplines, from personal health to business leadership to neuroscience.

Watch videos

World Renowned Bloggers


Big Think’s contributors offer expert analysis of the big ideas behind the news.

Go to blogs

Big Think Edge


Big Think’s Edge learning platform for career mentorship and professional development provides engaging and actionable courses delivered by the people who are shaping our future.

Find out more
With rendition switcher


Jonathan Nus: In 2006, the Pension Protection Act was passed.  That significantly increased the amount of cash funding that was required of companies.  It basically said that companies need to fund their pension plans over a seven year period.  Around the same time, there was an accounting change which was just as meaningful from our perspective.  The accounting change actually moved the pension deficits from the footnotes to the actual balance sheet.  As we know from many other accounting issues which have been moved from the footnotes to the balance sheet, there was a change in corporate behavior.  

Pension shortfalls are considered debt-like in our analysis.  But what’s interesting is that as many companies over the last couple of years have de-levered, and their balance sheets have become smaller, the ratio of the pension obligation in proportion to the company’s overall balance sheet has grown.  In fact, if you take a look at a typical corporate balance sheet, pension obligations are generally the largest financial obligation right after debt.  

And just to give you some perspective, in many recent studies that we’ve done where we’ve looked a credits across our entire rating spectrum, across various industries which are pension heavy as well, we find that pension deficits add nearly 20, sometimes 30 percent to a company’s reported debt levels.

We look at defined benefit pension plans from both a business risk and a financial risk perspective.  When we’re focused on business risk, we’re thinking about the competitiveness of that particular company in comparison to its peers in that industry and how pension plans relate to the company’s or issuer’s cost structure.  All of our credit metrics are adjusted for pensions.  We adjust debt, profitability, and cash flows to take into account the particular system that’s in place, no matter what region of the world that we’re discussing. 

We have seen an increased amount of cash contributions being put into a pension plan.  There are many corporate entities which have excess cash and they have funded their plan.  Some companies are using a low interest rate environment to go out and borrow funds, and they’re using the proceeds to put into their pension plan.  One thing that we’ve also observed from the fact that pension plans are now on the balance sheet is that the funding status is being more closely scrutinized in order to avoid excess volatility.  

Many companies are managing both the liability and the asset side of the equation together in a much more holistic way.  And those companies that are managing both the liability and asset side of the equation are minimizing much of the volatility and noise that ultimately affects their balance sheet and their capital structure. 

It’s in the financial risk that we actually seek to adjust a company’s reported metrics.  At S&P, our view is that pension underfunding is a debt-like obligation.  In our minds, a pension plan is nothing more than a form of deferred compensation whereby the employees essentially become creditors to their own companies.  These plans ultimately translate into a call on the cash flows of the entity.  And so we adjust leverage, profitability, and cash flow metrics as a result.  

Directed / Produced by

Jonathan Fowler & Elizabeth Rodd



Assessing Pension Risk

Newsletter: Share: