The names of most of the largest pension plans haven't changed that much in the past 40 years. Just about everything else has.
Once-dominant names like U.S. Steel and Western Electric are no longer among sponsors of top funds, victims of consolidation and big shifts in the industrial landscape. Total pension assets have soared. And the very structure of the pension system has been altered to one in which employees call the investment shots, away from one in which employers determine the investments.
Pensions & Investments has been ranking the largest pension funds by assets since 1975 and surveying them since 1978.
Through the years, corporate giants like General Electric Co., General Motors Co., International Business Machines Corp. and E.I. du Pont de Nemours & Co. regularly were among the leaders. The top public plans were found on both sides of the country — the New York State Common Retirement Fund, New York State Teachers Retirement System and the New York City Retirement Systems on the East Coast, and the California Public Employees' Retirement System and California State Teachers' Retirement System on the West Coast.
In the 1975 rankings, Sears, Roebuck & Co. was first with $2.957 billion; as of Sept. 30, 2012, Sears Holdings Corp. ranked 177th with $8.028 billion. United States Steel Corp. was fourth in 1975, with $2.286 billion; the latest survey has the steel maker at 179th at $7.987 billion. And Western Electric Co., No. 5 in 1975 with $2.236 billion, isn't even on the most recent ranking; its assets ultimately ended up combined with those of Alcatel-Lucent, which ranked 33rd with $40.961 billion.
The growth in assets has been exponential. For the plan year ended Sept. 30, 1978 — the first survey that included data from public plans — retirement assets of the top 1,000 pension funds totaled $353 billion; in the latest survey, for plan years ended Sept. 30, 2012, total assets for the top 1,000 were $7.534 trillion — more than 20 times the amount in the first survey.
In comparison, the Standard & Poor's 500 stock index was at 102.54 on Sept. 29, 1978; on Sept. 28, 2012 (markets were closed on Sept. 30 in both years), the index was 1440.67, about 13 times the level of 30 years earlier.
Along with equity gains, so many other factors have affected pension fund growth in the intervening years. There have been shifts in investment strategies, market impacts, contribution holidays, more participants, more retirees and regulatory changes.
But the largest single change in retirement funds over the past 40 years is a structural one — the move to defined contribution from defined benefit, particularly among corporate sponsors. “The widespread adoption of 401(k) plans really started during that (40-year) period, particularly since the early "80s,” said Alan Glickstein, senior retirement consultant, Towers Watson & Co., Dallas. The $2.291 trillion in DC assets for the top 1,000 as of Sept. 30, 2012, is in stark contrast to the $75 billion reported in 1985 — the first year DC assets were specifically broken out.
Case in point: In 2012, the largest pension plan in the P&I survey, the $325.7 billion Federal Retirement Thrift Plan, Washington, is entirely defined contribution.