This Month Only! >> $20 off and a FREE SHRM tote with your membership and code TOTE2018!
Sign up for free email newsletters and get more SHRM content delivered to your inbox.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
Despite sizable employer contributions and strong investment returns, the funded status of the 100 largest pension sponsors among U.S. publicly traded organizations fell for the second consecutive year in 2012, according to a
new analysis by consultancy Towers Watson. The study cited continued falling interest rates, which pushed liabilities to record highs, as the primary reason for the drop.
The analysis of corporate disclosures found that the overall aggregate funding ratio declined by 2 percentage points, from 79 percent funded at the end of 2011 to 77 percent funded at the end of 2012. Plan assets increased by 6 percent, while plan liabilities grew by 8 percent.
An unprecedented level of lump-sum buyouts and annuity purchases partially offset the increases in both assets and liabilities. Without this settlement activity, obligations would have increased by 12 percent, and assets would have risen by 10 percent.
Jump in Contributions
The 100 largest pension sponsors contributed $45.1 billion to their pension plans in 2012, up from $38.9 billion in 2011—and the largest contribution employers have made in the past five years. The analysis noted that the companies contributed more than twice the amount of benefits accrued last year to keep funding levels up.
“Buoyed by the stock market and large contributions, employers have rebuilt their pension plan assets to a point before the 2008 market collapse,” said Alan Glickstein, a senior consultant at Towers Watson. “However, that has been more than offset by growth in liabilities. Four consecutive years of declining interest rates have helped push liabilities 40 percent higher and left companies with even larger deficits than before.”
Good Start for 2013
One positive sign is that pension plans are off to a good start in 2013. “A strong equities market in the first quarter and roughly a 20-basis-point increase in interest rates have reversed the downward trend of the past few years,” observed Dave Suchsland, a senior consultant at Towers Watson. “Obviously, there is a long way to go until the end of the year, but funding ratios are moving in the right direction. If interest rates don’t continue their rise, and equity returns weaken, plan sponsors may need to pour more cash into their plans to improve funded status for the full year.”
Only 11 of the 100 largest U.S. companies offered a traditional defined benefit pension to newly hired salaried workers in mid-year 2012, down from 14 in 2011 and 89 in 1985, Towers Watson noted in
an earlier report.
is an online editor/manager for SHRM.
DOL Issues Annual Pension Funding Notice Requirements,
SHRM Online Benefits, March 2013
More Pensions to Offer Lump-Sum Payout Windows,
SHRM Online Benefits, February 2013
Shift to 401(k)s Continues Among Fortune 100 Companies,
SHRM Online Benefits, October 2012
Are Defined Benefits Plans Dead?,
HR Magazine, July 2012
SHRM Online Retirement Plans Resource Page
Keep up with the latest news. Sign up for SHRM’s free
Compensation & Benefits e-newsletter
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Become a SHRM Member
SHRM’s HR Vendor Directory contains over 10,000 companies