The collective funded status of 19 U.S. publicly listed corporations with more than $20 billion in pension liabilities, fell in 2014 as liabilities rose faster than assets, said an annual report from Russell Investments.
The companies, which Russell calls “the $20 billion club,” ended the year with an aggregate funding ratio of 80.4%, compared to 86.4% at the start of 2014. Liabilities increased $95.8 billion to $937.3 billion at the end of the year and assets rose $26.7 billion to $753.8 billion
Bob Collie, chief research strategist, Americas institutional, at Russell Investments, attributed the liability increase in 2014 to falling interest rates and the adoption of new mortality tables, which reflect longer life expectancies.
The median discount rate fell 83 basis points in 2014 to 4.02%. The average investment return on the pension assets for the 19 corporations reviewed was just over 10%.
Of the 19 corporations reviewed, at least 17 adopted the new mortality assumptions, resulting in a 3% to 4% or $29 billion increase in collective liabilities.
The report also found that the companies contributed a total of $16.8 billion to their pension funds in 2014, the lowest level since 2008 and down from $26.9 billion in 2013. Future contributions are anticipated to be lower due to the passage of the Highway and Transportation Funding Act of 2014, which reduces the minimum required contributions by plan sponsors, according to the report.
There were at least one or two corporations among the 19 reviewed that took advantage of the funding relief in 2014, Mr. Collie said.
A full copy of Russell's findings, including the constituents of the club, is available on Russell's website.
