Pension Funding Still Lagging 2007 Levels

A Towers Watson news release said overall pension deficits remain “substantial,”  and companies will need to make large contributions to their plans over the next few years.

The average pension funded status has increased from 70% at the end of 2008 to 78% at the end of 2009. While pension plan assets increased by 14% last year to $1,104 billion, they remain well below their year-end 2007 value of $1,312 billion, when the average plan was fully funded, the announcement said.

“Pension sponsors received some much-needed positive news last year with temporary relief and a strong stock market rebound,” said Alan Glickstein, senior consultant at Towers Watson, in the announcement. “However, with lower interest rates and consequently larger liabilities preventing additional gains, companies still face significant pension deficits in 2010.”

According to the analysis, the pension deficits at the companies studied are estimated to have declined from $293 billion at year-end 2008 to $225 billion at year-end 2009. These same firms had a $74-billion surplus at year-end 2007. These companies are estimated to have contributed 30% more to their pension plans in 2009 than in 2008.

“The legislative funding relief granted last year helped many companies with their funding issues, and we are hopeful that more legislative relief is in store this year,” said Michael Archer, senior consultant at Towers Watson, in the news release. “Without more relief or barring a significant extension of the capital market recovery, many companies will be forced to make sizable contributions into their plans using funds that might have been earmarked for critical business investments or other initiatives.”

The analysis examined U.S. pension data for 431 Fortune 1000 companies and estimated their funded status for 2009.

More information is at http://www.towerswatson.com/united-states/research/810.