Administration

Pension Funded Status Sees Recovery in December

Several firms note that the year-end market rally helped reverse a downward trend for pension funding in 2016.

By Rebecca Moore editors@plansponsor.com | January 11, 2017
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The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies as of December 31, 2016, returned to the same level, 82%, as it was as of December 31, 2015, according to Mercer.

Throughout most of 2016, rates and funded status remained lower than in 2015, but by the end of the year, funded status improved to the same level, Mercer notes.

However, for the year, deficits increased slightly from $404 billion at 2015 year-end to $408 billion at 2016 year-end. Interest rates decreased by 20 basis points in 2016, offsetting the positive impact of equity market gains.

Meanwhile, Aon Hewitt says, in 2016, U.S. pension plans in the S&P 500 saw the funded status deficit of their plans increase by $39 billion to $413 billion, according to the Aon Hewitt Pension Risk Tracker. The aggregate funded ratio decreased from 81.1% to 79.9%. The increase in the deficit was a result of a liability increase of $67 billion for the year that outpaced asset growth of $28 billion.

According to Wilshire Consulting, the aggregate funded ratio for U.S. corporate pension plans increased by 0.7 percentage points to end the month of December at 81.5%, eliminating its year-to-date decline and eking out a 0.1 percentage points gain for the year.

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