The funding ratio of S&P 500 companies' pension plans fell to 78.9% at the end of 2011, from 83.9% the previous year, according to a report from Standard & Poor's.
Plan assets totaled $1.322 trillion, with obligations of $1.676 trillion, according to the report, “S&P 500 2011: Pensions and Other Post-Employment Benefits.”
The drop in funding ratio was attributed to market conditions and low discount rates, which declined on average to 4.71% last year, from 5.31%.
As part of the effort to manage liabilities, according to the report, pension plans increased fixed-income exposure and reduced equity exposure to manage risk.
The average allocation to equity dropped to 48.4% from 51%, and fixed-income allocations increased to 40.9% from 35.9%.
Only 18 of the 338 S&P 500 firms with pension plans were fully funded. Twenty-five firms had a funding ratio between 90% and 100%, 84 firms had ratios between 80% and 90%, 113 between 70% and 80% and 64 between 60% and 70%. Thirty-four firms had funding ratios of less than 60%.
Howard Silverblatt, senior index analyst with S&P Dow Jones Indices and author of the report, said in a telephone interview that the federal highway bill signed by President Barack Obama on July 6 contains pension funding relief that solves a lot of these problems.
“Basically, it almost solves the problem without costing companies a penny,” Mr. Silverblatt said.
Overall, however, there is not a lot to worry about regarding their funding because of their “astronomically high values” and a lot of cash.
“The vast majority of retirees do not have that much to worry about given the asset levels of the companies,” Mr. Silverblatt said.
