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Member, Beacon International Group, Ltd.
Large pension plan funding levels slipped in 2015 as higher interest rates, which decreased the value of pension liabilities, were not enough to offset subpar investment returns, according to an Aon Hewitt survey.
On average, pension plans sponsored by companies in the S&P 500 were 80.0% funded as of Dec. 31, 2015, down from 81.3% as of Dec. 31, 2014, according to the survey, released Monday.
In all, the value of plan liabilities fell to $2.027 trillion at the end of 2015 compared with $2.120 trillion a year earlier, Aon Hewitt said. During the same one-year period, plan assets fell to $1.623 trillion from $1.724 trillion. That resulted in an aggregate funding deficit of $404 billion, up slightly from about $396 billion at the end of 2014.
“Looking ahead, we anticipate most plan sponsors will budget for additional pension contributions in 2016. This will help plan sponsors close the gap on pension funded status and minimize the impact of” rising Pension Benefit Guaranty Corp. premiums, Ari Jacobs, Aon Hewitt senior vice president and global solutions leader in Norwalk, Connecticut, said in a statement.
Under legislation Congress passed last year, the base PBGC premium, which is currently $64 per plan participant, will rise over the next three years until hitting $80 per participant in 2019. Meanwhile, the variable rate premium, now $30 per $1,000 of plan underfunding, also will rise annually during the same three-year period, hitting $41 per $1,000 of plan underfunding in 2019.
Iron Workers Local 17 Pension Fund, Cleveland, is seeking permission to cut benefits for participants, including retirees, as part of a proposed rescue plan awaiting approval from the U.S. Treasury Department.