The nation's 1,000 largest retirement plans ended two years of declines, with assets rising nearly 8% in the year ended Sept. 30.
The overwhelming majority of the increase was due to market returns, according to consultants.
Assets of the P&I Top 1,000 grew by $484.6 billion in the 12-month period, to $6.56 trillion, according to Pensions & Investments' annual survey of the largest U.S. retirement plan sponsors.
Defined benefit assets among the Top 1,000 grew 6.7% to $4.65 trillion, while defined contribution assets grew 11% to $1.91 trillion.
The 7.97% gain in the most recent survey contrasts with declines of 5.2% as of Sept. 30, 2009, and 13.1%, as of Sept. 20, 2008.
That return to the black, however, doesn't mean pension executives should expect a repeat of double-digit returns any time soon. Investment consultants were unanimous in their prediction that we are in a low-growth economic environment and increasing the asset base won't be easy.
“It's a challenge for all investors,” said Steven J. Foresti, managing director at Wilshire Associates, Santa Monica, Calif. ”The name of the game is to grow assets; but when you get 7.5% a year instead of 12.5%, you have to invest more money to meet those goals.”
Total assets for the 200 largest plan sponsors grew 7.6% to $4.88 trillion. Defined benefit assets among the Top 200 plans grew at an even smaller rate, up 6.3%, to $3.69 trillion.
When adjusted for the markets' gains, however, growth among the Top 200 and Top 1,000 was relatively flat.
In part, that's due to the continued trend of defined benefit plans paying out more in benefits than they are receiving in contributions, despite efforts by many companies to bring their funds closer to full funding.
Contributions by sponsors to defined benefit plans in the most recent survey totaled $93 billion, an increase of 16.4% from the year-earlier survey. Benefit payouts increased 20.8%, to $222.9 billion.
Increased contributions to defined benefit plans will be necessary for at least the next five years, as plans require more assets to fund participant retirements and conform to regulatory changes that require minimum pension funding levels, said Steven F. Charlton, director of consulting services at NEPC LLC, Cambridge, Mass.