The ongoing financial crisis drove the 100 largest corporate pension plans to experience a record $300 billion loss of funded status in 2008.
Consultants at Milliman Inc., Seattle, Wash., conclude in the 9th Annual Milliman Pension Funding Study that the 2008 loss wiped out all gains from the preceding 5 years.
The consultants note that the financial crisis contributed to a decline in the percentage of plan assets invested in equities to 44% in 2008, from 55% in 2007. A changed in investment policies was a lesser factor in the shift away from equities, the consultants say.
The plans’ funded status fell to less than 80% at the end of 2008, down from about 106% at the end of 2007, the consultants write. This trend is continuing in 2009: by the end of February, the plans’ funded status had decreased by over $30 billion, to 74%, the lowest level since May 2003.
The losses will likely produce increased pension expenses for 2009 and a charge to corporate earnings of over $70 billion, the consultants predict. In 2008, in contrast, pension expense decreased to $10 billion — the lowest level since 2002.