The heyday of U.S. corporate pension plan funding ended in 2007, when the aggregate level of funding was 106%, according to an analysis by Willis Towers Watson, a global advisory company. And though corporate funding of pensions is much better than public employee pension funding, the 2018 amount dropped slightly to 84% from 85% in 2017.
“Pension plans had been on track for another year of improved funding through the third quarter of 2018 as a result of higher interest rates, relatively stable equity markets and solid contributions,” said Jennifer DeMeo, senior consultant at Willis Towers Watson, in a statement. “However, the steep declines in the equities markets during the fourth quarter, particularly in December, negated what had been a very positive year.”
The analysis of 389 Fortune 1000 companies that sponsor U.S. defined benefit pension plans and have a December fiscal-year-end date found a projected deficit of $255 billion at year end, slightly less than the $260 billion deficit in 2017.
- Pension plan assets fell to an estimated $1.33 trillion at the end of 2018 from $1.48 trillion at the end of 2017. Total pension obligations declined to an estimated $1.59 trillion in 2018 from $1.74 trillion in 2017.
- Overall investment returns were estimated to average a negative 4.7%, although returns varied by asset class. Domestic large-cap equities lost 4%, while small/mid-caps lost 10% on average. Long corporate bonds lost 7%, while long government bonds lost 2%, according to the analysis.
- Company contributions were $47 billion in 2018. Willis Towers Watson stated that many plan sponsors took advantage of the larger tax deduction due to the new tax law.
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