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Towers Perrin: U.S. Pension Funded Level Rises 4%

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NU Online News Service, Aug. 27, 2003, 4:21 p.m. EDT – The funded level of the typical U.S. defined benefit pension plan probably increased 4% between the end of the first quarter and the end of the second quarter, according to a report from Towers Perrin, New York.

Changes in funded levels in plans in six developed regions of the world ranged from a decrease of 4% in Canada to an increase of 9% in Japan, Towers Perrin analysts write.

Canada was the only region studied where the funded level dropped in the second quarter.

But, because investment returns have been so poor for so long, overall pension plan funded levels are still down about 27% to 44% from the level recorded on Jan. 1, 2000, the Towers Perrin analysts write.

The funded level of the typical U.S. plan has fallen 41%.

A separate Towers Perrin report shows that the average funded status of pension plans at 300 major U.S. companies stood at 78% at the end of 2002, down from 120% at the end of 1999.

The Towers Perrin analysts came up with the report by examining the effects of changes in the stock and bond markets on a benchmark plan in each region, with liabilities estimated under accepted international accounting standards and adjusted to reflect current interest rates in each country.

Japan did particularly well in the second quarter because of recoveries in the domestic and global stock markets, and U.S. pension plans benefited from recoveries in the U.S. stock and bond markets.