P&I's April 29 special report analyzed the largest U.S. corporate defined benefit pension plans. Over the past five years, the aggregate funding ratio declined 2.5 percentage points to 78.7%. However, there were significant differences between individual plan sponsors' funding ratios. Of the plans with Dec. 31 fiscal years and five years of data, Duke Energy and J.P. Morgan Chase & Co. had the largest improvements.
Duke Energy's funding ratio improved 28 percentage points to 96.6% at the end of 2012 from 68.6% at the end of 2008. J.P. Morgan Chase & Co.'s improved 24.9 percentage points to 113.4% at the end of 2012.
The plan sponsors' annual financial reports had many similarities. Both plans had significant declines in asset values in 2008 and subsequently recovered from losses in the following four years. Both companies faced actuarial adjustment headwinds. The biggest positive for funded status came from the level of employer contributions.
Duke Energy put $1.7 billion into its defined benefit pension plans during the past five years. Contributions averaged almost 10% of starting assets each year. Its 2009 contribution of $800 million was the most significant. J.P. Morgan's $2.8 billion contribution in 2009 was a whopping 40.6% of the company's starting U.S. defined benefit assets.
The two funded status winners highlight that while capital market returns and actuarial factors are often beyond the control of plan sponsors, contributions can move the funded status needle significantly.