$20 billion club sees 2013 pension improvements

Assets rose and liabilities fell in 2013 among the 19 U.S. publicly listed corporations with more than $20 billion in defined benefit pension plan assets, improving the funded status of those plans, according to a report from Russell Investments.

The funding ratio of the companies at the end of 2013 was 86.4%, compared to 75.9% the year before.

The fourth annual report on the companies that make up what Russell calls “the $20 billion club” attributes the turnaround to the long-anticipated reversal in interest rates.

“I think what this represents is the first time we actually have final accounting statements that indeed confirm the tide has … turned,” said Bob Collie, chief research strategist, Americas institutional, in a telephone interview.

The median discount rate rose to 4.89% in 2013, following a four-year period in which the median rate had fallen to 4% from 6.4%. Strong investment returns also contributed to the improvement in the state of the plans, with an investment return of nearly 9%, according to the report.

The total fair value of plan assets for the 19 companies was $727.1 billion at the end of 2013, compared to $694.4 billion the year before, while projected benefit obligations fell to $841.5 billion, from $914.8 billion.

Mr. Collie said last year's liability numbers should remain an all-time high.

“It would take quite a dramatic turnaround in (interest rates) for the liability level to get back to where it was a year ago,” he said.

The smaller shortfall also means fewer contributions to the plans by the $20 billion club. The 19 firms expect to contribute a total of about $14.3 billion in 2014. The companies made a total of $26.9 billion in contributions in 2013.

A full copy of Russell's findings is available on its website.