Towers Perrin Pension Index Sees Uptick in October

 With the October increase, the Pension Index is now up 2.1% from its value of 66 at the start of 2009, but down 15% from its October 31, 2008, level of 79.3.  Additionally, the benchmark investment portfolio used in the index recorded a -1.3% return for October, dropping the year-to-date return to 14.2, while the index liability measure (based on projected benefit obligations) fell 1.5% in October, but remains up 10.7% for the year.

In its tracking of a group of 300 large U.S. companies – the TP 300 – Towers Perrin estimates the aggregate unfunded amount at $342 billion as of October 31, 2009, essentially unchanged from the $339 billion unfunded that the companies reported at the close of their 2008 fiscal years.  The updated funded status figure reflects the net impact of a number of offsetting factors: a significant decline in discount rates pushing up liability values, strong returns pushing up (the relatively smaller) asset amounts, and a high rate of expected plan contributions, significantly in excess of the cost of benefits earned during the year, the news release said.

Towers Perrin noted that the year-to-date results for aggregate funded status include about 14% of companies with measurement dates before year-end 2008 (e.g., June 30 or September 30).  For these companies, all or most of the losses experienced in the fall 2008 are included in their estimated year-to-date results.  These early measuring companies experienced an estimated $29 billion decline in funded position since the close of their 2008 fiscal years, while the larger group of companies with measurement dates on or around December 31, 2008, had an estimated $26 billion improvement in aggregate funded position.