Large pension plans' funding levels improve: Mercer
Reprints
Funding levels of large corporate pension plans improved in August as strong equity market returns and slightly higher interest rates aided plans’ funded status, Mercer L.L.C. said Wednesday in an analysis.
The average funding level of pension plans sponsored by companies in the S&P 1500 rose to 72% in August, up from the record low of 70% in July.
“Finally, there is a bit of positive news after several months of setbacks,” Jonathan Barry, a Mercer partner in Boston, said in a statement.
In addition, the aggregate deficit of the plans fell to $631 billion in August compared with $689 billion in July.
Even with the improvement, however, plan underfunding has grown dramatically since last year. For example, the August aggregate funding deficit of $631 billion compares with a $484 billion funding shortfall at the end of 2011.
Amid market volatility, which can have an enormous impact on plans’ funding levels and how much employers have to contribute to the plans, more employers are examining ways to reduce their pension plan risk.
“We are seeing increased interest in risk-transfer strategies, such as lump-sum cash-outs and annuitzation, as ways to manage pension risk,” Mr. Barry said.
For example, General Motors Co. and Ford Motor Co. have offered certain plan participants the opportunity to take their monthly annuity payments as a lump sum, while GM has purchased a group annuity from Prudential Insurance Co. of America to replace benefits certain retirees received from GM’s pension plan.
Read Next
-
Funding levels for biggest employer pension plans plunge in July: Milliman
Funding levels of pension plans sponsored by large publicly held U.S. employers plunged in July as lower interest rates fueled a rise in plan liabilities, Milliman Inc. said in an analysis released Monday.
Related Stories
-
Funding levels for biggest employer pension plans plunge in July: Milliman
-
Funding deficit of large pension plans hits record high in July: Mercer
