S&P 500 company pension deficit drops 50% in 2013

S&P 500 pension plan underfunding was cut in half to $224 billion in fiscal year 2013, down from $452 billion in 2012, said research by S&P Dow Jones Indices.

The funding ratio of pension plans sponsored by companies in the S&P 500 rose to 87.8% in 2013, up from 77.3% last year.

The report also indicated that the estimated pension return rates declined to 7.1% from 7.31% in 2012 and the discount rate rose to 4.69%, up from 3.93%.

During the same period, other post-employment benefits underfunded levels decreased to $181 billion from $235 billion. The funding ratio of OPEB rose to 28.5% from 22.3%.

Together, the assets that S&P 500 companies set aside to fund pension benefits and OPEB totaled $1.7 trillion in 2013, covering $2.1 trillion in obligations and resulting in a underfunding of $405 billion.

“In aggregate, pensions and OPEBs have become an acceptable and manageable expense for S&P 500 companies with respect to their underlying assets, earnings and cash-flow,” said Howard Silverblatt, senior index analyst and author of the report, in an e-mail.

Meaghan Kilroy writes for Pensions & Investments, a sister publication of Business Insurance.