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[IWS] Towers Watson: CORPORATE PENSION PLAN FUNDING LEVELS INCREASED SHARPLY IN 2013 [2 January 2014]

IWS Documented News Service

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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Towers Watson

 

 

Press Release 2 January 2014
Corporate Pension Plan Funding Levels Increased Sharply in 2013, Towers Watson Analysis Finds
Higher stock market and interest rates push funding to best level since 2007; still well below 100%
http://www.towerswatson.com/en/Press/2014/01/corporate-pension-plan-funding-levels-increased-sharply-in-2013

NEW YORK, January 2, 2014 — The pension funded status of the nation’s largest corporate sponsors increased sharply in 2013 due primarily to rising interest rates (which lowered liabilities) and a strong stock market, according to a new analysis by global professional services company Towers Watson (NYSE, NASDAQ: TW). In reviewing estimated year-end pension plan results, Towers Watson found that 2013 pension plan funding levels increased by 16 percentage points to reach their highest levels since 2007.

The Towers Watson analysis examined pension plan data for the 418 Fortune 1000 companies that sponsor U.S. tax-qualified defined benefit pension plans and have a December fiscal-year-end date. Results indicate that the aggregate pension funded status is estimated to be 93% at the end of 2013, a sharp jump from 77% at the end of 2012, but still well below the 106% funding at the end of 2007. Overall, pension plan funding improved by $285 billion last year, leaving a deficit of $99 billion at the end of 2013.

Fortune 1000 aggregate pension plan funding levels

Year

Aggregate
level

2000

124%

2001

101%

2002

82%

2003

89%

2004

90%

2005

91%

2006

99%

2007

106%

2008

77%

2009

81%

2010

84%

2011

78%

2012

77%

2013*

93%

*Estimated

"The strong stock market and higher interest rates last year gave plan sponsors the one-two punch they needed to cut the funding deficit of their corporate pension plans by nearly 75%," said Alan Glickstein, a senior retirement consultant at Towers Watson. "As a result of the funded status improvement, funding ratios are now at their highest levels since the financial crisis of 2008, but still well below 100%, a level reached only three times since 2000. The improved funding environment, together with legislative funding stabilization enacted in 2012, gave plan sponsors some relief from record levels of contributions since the 2008 recession."

The Towers Watson analysis estimates that companies contributed $48.8 billion to their pension plans in 2013 — 30% less than in 2012. Pension plan assets increased by an estimated 5% in 2013, from $1,288 billion at the end of 2012 to an estimated $1,409 billion at the end of last year.

"The improved funding environment will provide pension plan sponsors with some intriguing opportunities for 2014," said Dave Suchsland, a senior retirement consultant at Towers Watson. "We expect the actions we've seen among companies to de-risk their pension plans over the past several years will accelerate as funding levels continue to improve, especially in light of increases in PBGC premiums and mortality tables, and projection scales with increased life expectancy."

About the Analysis

The companies analyzed represent 418 Fortune 1000 firms with December fiscal-year-end dates for which complete data were available. The 2013 figures are estimates of U.S. plan assets and liabilities. The earlier figures are actual. Actual year-end 2013 results will not be publicly available until spring 2014.

 

 

 

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