Pensions Continue Lowering Assumptions

PwC analyzed 100 companies, comprising Fortune 100 and other large and established companies, with a December 31 measurement date, and found the 2012 median discount rate decreased 75 basis points since 2011 and 225 basis points since 2007. The 2012 median expected long-term rate of return on pension plan assets decreased 25 basis points since 2011 and 55 basis points since 2007.

Median plan funding levels remained constant from 2011 to 2012, with pension plan assets equal to approximately 77% of the projected benefit obligation (PBO) at the end of both years. By comparison, in 2007 the median funding percentage was 100%.

Median deferred losses for pension also remained constant at 37% of the projected benefit obligation at the end of 2012 and at the end of 2011. In 2007, deferred losses were only 12% of the PBO.

Median asset allocations remained relatively constant at 46% equity, 37% debt/fixed income and 15% other in 2012, compared with 45% equity, 35% debt/fixed income and 6% other in 2011. In 2007, however, the median values were 64% equity, 29% debt/fixed income and 6% other.

PwC also analyzed corporations’ other post-employment benefits (OPEB) obligations, and found the 2012 median discount rate decreased 71 basis points since 2011 and 236 basis points since 2007. OPEB plan funding has changed slightly with 48% of plans being funded in 2012, compared with 50% of plans being funded in 2011 and 53% being funded in 2007.

A full report of the analysis can be downloaded from here.