There's no good news among five different reports on pension plans' funded status, whether you look at last year or as recently as last month.
For 2008, the 100 largest U.S. corporate pension plans saw their funded status fall by 30 percentage points, dropping to 79% funded as of Dec. 31 from 109% at the end of 2007, according to an analysis by Watson Wyatt Worldwide, Arlington, Va. That's based on cumulative assets of $798.9 billion and liabilities of $1.017 trillion at the end of 2008, compared with $1.078 trillion in assets and $992 billion in liabilities a year earlier.
Recent information isn't any better. For February, Milliman Inc. reported a funded status of 71.7% for the top 100 plans; Mercer, 74% for plans in the S&P 1,500; BNY Mellon Asset Management, 67.7% for its typical pension plan; and Towers Perrin, 60.2% for its benchmark plan.
Last year, according to Watson Wyatt, the plans lost $303 billion in assets as funding levels fell to a $217 billion deficit from an $86 billion surplus at the end of 2007. Assets of the 100 largest plans declined 26% to $799 billion as of Dec. 31.
Only 14% of plans had funding levels greater than 90% at the end of last year; a year earlier, four-fifths of the plans were more than 90% funded.
According to Watson Wyatt, high allocations to equities were the culprit for plans that lost the most assets in 2008, an average 32.3% decline for those with at least 90% of assets invested in stocks.
Plans with less than 20% in equities lost an average of 6%.
“There's more and more of a realization that equities have a lot of inherent risk,” said David Speier, senior retirement consultant at Watson Wyatt. “Those that had a majority in bonds ... are the lucky ones.”
Only 2% of plans invested less than 20% in equities and only 1% invested more than 90%.
Two-thirds of the plans allocated between 55% and 74.9% of assets to equities. Among those plans, returns ranged between -23.64% and -28.04%.