Pension plan funding levels slip in 2011: Towers Watson

Hurt by falling interest rates, which boosted the value of plan liabilities, as well as mediocre investment results, the funding levels of the nation’s largest employer-sponsored pension plans slipped in 2011, according to a Towers Watson & Co. analysis.

Towers Watson’s analysis of financial statements filed by sponsors of the 100 largest pension programs found that plans on average were 78% funded at the end of 2011, down from 2010, when plans on average were 83% funded. Pension plan size was based on plan liabilities at the end of 2010.

Plan liabilities shot up to nearly $1.259 trillion compared with about $1.136 trillion at year-end 2010. In all, plans were underfunded by $260.1 billion at the end of 2011, up from $173.5 billion in 2010. At the end of 2007 before the plunge in the equities’ markets and the start of the Great Recession, the plans had an aggregate surplus of $85.3 billion.

Only 39% of employers’ plans were at least 80% funded at the end of 2011, down from 64% in 2010, according to the analysis, which was released last week.

On the other hand, 56% of employers in 2011 had pension programs whose funded percentages ranged between 60% and 79.9%, a sharp increase from 2010, when 32% of employers had programs with funded levels in that range.