Proposed US reforms to encourage companies to fully finance their pension plans could potentially cause a ratings decline, according to Standard & Poor’s, the ratings agency.

Underfunding of company pension plans has shrunk since 2003 as the stock market has improved, but the failure of a string of steel companies and airlines has increased the pressure on the Pension Benefit Guaranty Corporation and prompted calls for reforming the system.

Last month, the PBGC took responsibility for certain US Airways pension plans that have an estimated $2.3bn underfunding. Prior to this, it took on UAL plans, taking $2.1bn of liabilities. In 2004, the PBGC stated a record deficit of more than $23bn for single employer plans compared with additional $7.7bn three years before.

The PBGC has evaluated the single-employer plans it insures were underfunded by about $450bn, up from $350bn in 2003. Plans of those companies are below investment grade, and therefore more likely to face problems were underfunded by $96bn, compared with $82bn.

Current proposals envisage a significant growth of the premium companies pay to insure their schemes with the PBGC and accounting methods change to estimate assets more closely to market values instead of “smoothing” valuations to reduce portfolio volatility to minimum, according to Jennifer Hughes’s report.