S&P 500 companies pension plan funding rose to 104% in 2007, marking the first time the plans have been overfunded in aggregate since 2001, according to a new study by Standard & Poors.
Pension assets increased 2.3% to $1.5 trillion, while obligations fell 4.6% to $1.44 trillion in 2007. As a result, plans had $63.4 billion in aggregate excess assets. Companies contributed $34.7 billion to their pension funds in 2007, and expect to add $30.8 billion this year.
Asset allocations followed a flight to safety, as fixed-income assets rose to 32.3% from 29.4% of total assets at the expense of equities, which dropped to 61.3% from 64.1%.
The funding level for other post-employment benefits offered by 310 of the S&P 500 companies rose to 26%; however, the state of OPEB remains extremely poor, according to the report. OPEBs have no fallback support, like pensions have from the federal government, but are still underfunded by $269.1 billion. Just six companies were overfunded: Comerica Inc., JPMorgan Chase & Co., LSI Corp., PerkinElmer Inc., PG&E Corp. and Principal Financial Group Inc.
Given the low funding and the ability of companies to change, modify and cancel programs, the reality for many retirees is that, just as their children may not have it as good as they did, their retirement may not be as good as their parents, the report says.