Milliman: Record 2012 contributions fail to buoy U.S. corporate pension funding

The 100 largest U.S. corporate pension plans made record contributions in 2012, but it was not enough to prevent a funded status decline and record aggregate pension deficit, according to a report from Milliman.

Companies contributed an aggregate $61.5 billion to their pension plans in 2012, up 10% from 2011, but less than Milliman expected. The report cites pension funding relief in last year's federal highway bill as the likely reason for smaller contributions.

Despite an average 11.7% investment return among the 100 largest plans, the discount rate fell to 4.02% at the end of 2012 from 4.76% the year before, resulting in a funded status drop to 77.2% from 79.2%. The aggregate pension deficit ballooned to $388.8 billion from $327.7 billion even though 15 companies had a combined $45 billion reduction in liabilities through derisking strategies. General Motors Co., Ford Motor Co. and Verizon Communications Inc. accounted for $41 billion of the reduction.

This also marks the first time in the 13-year history of the Milliman Pension Funding Study that GM no longer has the largest pension fund by assets, replaced by IBM Corp. GM still has the largest amount of liabilities at $111 billion.

NextEra Energy Resources LLC had the highest funded plan at 143%, while Delta Air Lines Inc. was on the opposite end at 38%. Six of the 89 companies with calendar-year fiscal years had a surplus funded status, down from eight companies each in 2011 and 2010. Thirty-eight companies reported an increase in funded status, up from 14 in 2011.

Last fiscal year also saw a record level of $55.8 billion for pension expense, the charge to company earnings, which is up $17.3 billion from the 2011 fiscal year. Milliman expects pension expenses and contributions to continue to increase this year.

Unfunded liabilities made up 7.2% of the companies' market capitalization, up from 6.5% in 2011.

Asset allocations remained nearly identical from the year before, following a year when equity allocations decreased by more than five percentage points.