Data for fiscal 2011 shows that S&P 500 defined benefit pensions reached an underfunding status of $354.7 billion in 2011, an increase of over $100 billion from the end of 2010 and surpassing the record $308.4 billion underfunding level set in 2008. OPEB underfunded levels increased to $223.4 billion in 2011 from $210.1 billion at the end of 2010.
Combined, the amount of assets that S&P 500 companies set aside to fund pensions and OPEB was $1.38 trillion, covering $1.96 trillion in obligations with the resulting underfunding equating to $578 billion, or a 70.5% overall funding rate.
The report also shows that estimated pension return rates declined for the 11th consecutive year, dropping to an estimated 7.60% in 2011 versus 7.73% in 2010 and 7.83% in 2009. Discount rates declined for the third year in a row, falling 60 basis points to 4.71% from 5.31% in 2010, significantly increasing projected obligations.
Within the S&P 500, 292 companies offered OPEBs in 2011. With $285.6 billion in OPEB obligations, only $62.3 billion was funded, pushing OPEB funding levels down to 21.8% from the 23.5% registered in 2010.
The report, “S&P 500 2011: Pensions and Other Post Employment Benefits (OPEB)”, can be accessed at http://www.spindices.com/sp500.