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Fueled by slumping interest rates that inflate the value of pension plan liabilities, the funded status of defined benefit plans sponsored by Fortune 1000 companies slumped in 2011, reversing two years of increases, according to an analysis released Tuesday.
The aggregate funding level of 422 pension plans offered by Fortune 1000 companies fell to 78% in 2011, down from 84% in 2010 and 81% in 2009, according to the Towers Watson & Co. analysis.
“Employers’ sizable cash contributions to their plans could not counteract the effects of lower interest rates and poor stock market results,” Mike Archer, a senior retirement consultant in Towers Watson’s Parsippany, N.J., office said in a statement.
In all, plan liabilities shot up 8.5% to $1.543 trillion in 2011, while assets increased about 1% to $1.193 trillion, Towers Watson said.
Thirty-two percent of employers sponsored plans with funding levels below 70% in 2011, up sharply from 21% in 2010.
At the same time, just 11% of employers had plans that were more than 90% funded in 2011, down from 20% in 2010.
Other studies have reported similar declines in plan funding in 2011.
Retirement assets in the 13 major global markets increased 4% to a record $27.5 trillion in 2011, according to Towers Watson & Co.'s annual Global Pension Assets Study.