Defined benefit pension funds of companies in the Milliman 100 Pension Funding Index sustained combined losses of more than $300 billion in 2008, an amount equal to the last five years of gains, according to a study by the actuarial and consulting firm.
Employer contributions are expected to increase by 68% in 2009 to $50 billion, because of losses in funded status and new Pension Protection Act funding requirements, according to a news release from Milliman. The $29.7 billion in contributions last year was up 0.09% from 2007, and are projected to jump to more than $50 billion for 2009.
Asset losses drove a decrease in funded status from about 106% at the end of 2007 to less than 80% at the end of 2008, John Ehrhardt, principal and consulting actuary in Millimans New York office and co-author of the study, said in the news release. At the end of February, the funded status of the Milliman 100 pension plans stood at 74%, the lowest since May 2003.
A drop in equity allocation to 44% from 55% in 2008, primarily the result to market declines and changes in investment policies, will require a $100 billion investment to get the plans back to the 55% equity allocation, Paul Morgan director of capital markets at Evaluation Associates and co-author of the report, said in the news release.
The study is available for download at http://www.milliman.com.