The funded ratio of the average U.S. corporate defined benefit pension plan increased 8 percentage points to 78% in 2009, according to a Towers Watson analysis of 431 Fortune 1000 companies.
Total Assets among the Fortune 1000 plans increased 14% to $1.104 trillion from 2008, but remained below the 2007 year-end value of $1.312 trillion.
Alan Glickstein, Towers Watson senior consultant, said pension funds were given a boost last year by a rebound in the stock market and eased government restrictions under the Pension Protection Act. But he added that lower interest rates could create significant liabilities in 2010.
He said that with Pension Protection Act funding requirements set to kick in this year, plans will be required to have an 80% funded ratio in order to make full lump-sum payments.
“They don't want to tell participants that they are 78% funded and can't pay all benefits,” he said in a telephone interview.
Pension deficits among the Fortune 1000 plans are estimated to have dropped 23% in 2009 to $225 billion. Contributions were up 30% from 2008.
“The legislative funding relief granted last year helped many companies with their funding issues, and we are hopeful that more legislative relief is in store this year,” Michael Archer, a senior consultant at Towers Watson, said in a news release. “Without more relief or barring a significant extension of the capital market recovery, many companies will be forced to make sizable contributions into their plans using funds that might have been earmarked for critical business investments or other initiatives.”