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Member, Beacon International Group, Ltd.
The funded status of pension plans sponsored by large companies remained stable in 2015 as higher interest rates, which lower the value of plan liabilities, offset lackluster investment returns, according to a survey released Monday.
Pension plans sponsored by Fortune 1000 companies were an average of 82% funded at year-end 2015 — unchanged from 2014, but sharply lower compared to 89% in 2013.
“An increase in corporate bond rates in advance of the Fed’s recent interest rate decision, combined with a flat global stock market, contributed to keeping pension plans in roughly the same financial shape as the previous year,” Alan Glickstein, a senior retirement consultant in Towers Watson & Co.’s Dallas office said in a statement.
“While pension obligations declined last year, so did assets. There was a lot of movement in the funded status throughout the year, but at the end of the year, essentially nothing changed overall,” Mr. Glickstein added.
Employers contributed $32 billion to their plans in 2015, down from $39 billion in 2014 and $42 billion in 2013.
Contributions have declined at least in part due to legislation Congress passed in recent years that allows employers — for funding purposes — to use higher interest rate assumptions in valuing liabilities.
In all, plans analyzed by Towers Watson had a funding shortfall of $291 billion in 2015, down from $319 billion in 2014.
The analysis is based on 413 Fortune 1000 companies with December fiscal-year dates for which complete data was available.
With a flat investment performance and interest rates holding about steady, the funded status of very large pension plans showed little movement in November, according to a Milliman Inc. survey released Monday