It happens like clockwork. As soon as a magnanimous stock market boosts pension assets to high-water marks, pension raiders lurk around--they can't wait to get their hands on the "overfunded" portfolio.

Right now, at several well-managed funds, assets may soon exceed the plan's liabilities and their funding ratio will exceed 100 percent. When this happens, politicians may want to skip making contributions, so they can spend the money elsewhere. Employee groups, retirees and unions may seek benefits enhancements, such as a supplemental cost-of- living increase or a richer benefits formula. During the last bull market cycle, Washington State had a buzzword for another form of such raids: "gain-sharing." This meant that pension assets over the 100 percent funding level would be shared with employees. When the market hit a bear bump, the pension fund's assets also plummeted. No wonder current Governor Christine Gregoire wants that 1998 law repealed.

Is there an overfunding point at which it's safe enough to let the pension raiders have their way?

Let's do the math. In recessions, the stock market typically falls by 25 percent. Sometimes it implodes more, as in the 1973-74 and 2000-03 bear markets. Pension funds usually invest 60 to 65 percent of their assets in stocks and other forms of equity, and the rest in bonds. In a recession, bonds often gain a little in value, so the impact of a typical 25 percent stock market decline on a pension fund is 13 to 15 percent of the entire portfolio's value, resulting in assets declining to 85 to 87 percent of their peak levels.

In light of this inherent cyclicality, the lowest point at which a pension fund could be considered to be overfunded must be 100 percent divided by 85 percent, which requires a market-peak funding ratio in the vicinity of 118 percent in assets-to-liabilities. And to protect against a 40 percent stock market decline such as 2000-03, a belt-and- suspenders overfunding point is 125 to 130 percent.

So, when the pension raiders re-emerge, as they will, it's up to fund trustees to just say no, clip some profits to build cash reserves and enjoy the bull market's ride--while it lasts.