Strong investment returns and sizable employer contributions were not enough to improve the funded status of the 100 largest publicly traded U.S. corporate pension plans, according to a report from Towers Watson.
The aggregate funding ratio fell to 77% at the end of 2012 from 79% a year earlier, according to year-end corporate disclosures.
Overall, the companies contributed $45.1 billion in 2012, up from $38.9 billion in 2011, while the average investment return among the top 100 was 12.5%, bringing plan assets to $1.014 trillion at the end of 2012, from $958.8 billion.
However, the total projected benefit obligation increased to $1.309 trillion at the end of 2012 from $1.212 trillion because of the drop in the average discount rate to 4% from 4.8%.
The overall deficit increased to $295.2 billion at the end of 2012 from $252.7 billion at year-end 2011.
While the top 100 plans increased their target allocations to fixed income, a trend that has continued since 2009, the pace of that increase has slowed. The average target allocation to fixed income reported for 2013 was 40%, compared with 39.4% in 2012 and 36.4% in 2011.
The average public equity target dropped to 45.3% for 2013 from 46.4% in 2012 and 50.3% in 2011.
Remaining relatively steady was the average target for real estate, at 3.1% in 2013, while cash increased slightly — to 1% in 2013 from 0.9% in 2012 — and “other” increased to 10.6% from 10.3%.
“I think the most interesting thing … is how many things are going on behind the surface in a year that doesn't look that exciting,” said Alan Glickstein, Dallas-based senior retirement consultant at Towers Watson.
Mr. Glickstein said it's notable that despite some very strong investment returns and large contributions — “much larger than we might have expected” given the MAP-21 federal highway law that was supposed to give companies pension funding relief — companies still have a long way to go.
“The balancing equation … is that interest rates continue to drop from what many thought was a bottom, and drove liabilities and almost offset those other positive factors,” Mr. Glickstein said.