U.S. retirement plans lost close to 30% of their value in 2008, according to the Federal Reserve's Flow of Funds report.
The only good news: The government's own retirement plan grew 2%, largely because most of the assets are invested in non-marketable U.S fixed-income securities, rather than equities.
The results of the report are depressing and will force many (defined contribution plan participants) to reassess their savings and retirement plans, said Craig Copeland, senior research associate, Employee Benefit Research Institute, Washington.
Key findings in the report, released March 12, included:
• Total assets in all corporate defined benefit and defined contribution plans as of Dec. 31 were $4.6 trillion, down 28% from the end of the previous year.
• Total assets in corporate defined benefit plans were $1.93 trillion, down 27.6%.
• Total assets in corporate defined contribution plans were $2.66 trillion, down 28.5% from year-end 2007.
• Total assets in state and local government retirement funds at the end of 2008 were $2.3 trillion, down 26.8% from the end of the previous year.
• Total assets in the federal government's retirement plans at the end of 2008 were $1.2 trillion, up 2% from the end of the previous year.
The plunge in equities had a major impact on assets of both defined benefit and defined contribution plans.
Corporate DB plans had $771 billion in equities at the end of 2008, a 46.5% decline for the year. Corporate DC plans had $877 billion in equities, down 37.2%.
That equity in defined benefit plans declined more sharply than in defined contribution plans is not related to performance but to larger benefit payments being paid out of the DB plans, said EBRI's Mr. Copeland.
Public pension funds held $1.24 trillion in equities at the end of 2008, down 37.7% from the end of the previous year.
The corresponding values of corporate DB and DC plan assets in mutual funds, which were largely invested in equities, were $228 billion and $1 trillion, respectively, at the end of 2008, down 32.7% and 33.7%, respectively, from the end of the previous year.
Public pension fund mutual fund holdings were down 32.8% during the year, to $199.2 billion.
The report's gloomy news comes as no surprise, confirming that most plans and plan participants are hurting, analysts said.
All three systems (corporate DB, corporate DC and public DB) took huge hits, and they're all in deficit right now, said Frank Todisco, senior pension fellow, American Academy of Actuaries, Washington.
The DB plans, public and private, are in deficit relative to the benefits they have promised, he said. The DC plans can be described as being in deficit as well because they're in deficit relative to people's retirement needs,
The question is how well the three systems will bounce back over time, and that's related to how well the overall economy rebounds.