The funded status of the largest corporate pension plans fell nine percentage points in 2014, down to 80% from 89% in 2013, Towers Watson said.
Falling interest rates and improved mortality assumptions nearly “wiped out” 2013's gains, bringing the funded status closer to 2012 levels, when it was 77%, said Dave Suchsland, senior retirement consultant at Towers Watson.
“At this time last year, everybody was celebrating the big jump in funded status. We've wiped out 2013 at this point.” Mr. Suchsland said in a telephone interview. “An already challenged pension system has now taken a significant step backward.”
About 40% of the funding deficit increase can be attributed to strengthening mortality assumptions published by the Society of Actuaries in 2014, Mr. Suchsland said.
An approximately 90-basis-point drop in the discount rate further drove liabilities upward.
Towers Watson estimated that the overall pension funding deficit rose $181 billion to $343 billion during the year, while assets increased 3% to $1.4 trillion. Investments returned 9% during that period.
Towers Watson also found that employer contributions fell to $30 billion in 2014, down 29% from 2013 and the lowest level since 2008.
Mr. Suchsland attributed the decline to the improved funding position at the start of the year and legislation that reduced required contributions.
“(Some) companies that started the year at a better funding position weren't thinking they had to put as much money in,” Mr. Suchsland said.
Towers Watson analyzed data from 411 Fortune 1000 companies with a fiscal year ended Dec. 31.
