The aggregate funded status of 20 U.S. publicly listed corporations with more than $20 billion in pension fund liabilities was relatively flat in 2015 compared to 2014, said the most recent annual report from Russell Investments.
The 20 companies with the largest global pension liabilities, which Russell calls “the $20 billion club,” ended 2015 with a collective deficit of $181.6 billion, down from $193.8 billion at the start of the year.
The companies' collective liabilities and assets declined $54.1 billion and $41.9 billion, respectively, over the year to $913.9 billion and $732.3 billion at the end of 2015. The collective funded status was 80.1% at the end of 2015 vs. 80% at the start of the year.
“In some previous years, there has been a single dominant cause behind the change in funded status: longevity improvements in 2014; rising interest rates in 2013; calamitous asset performance in 2008. But there was no such single story in 2015. Rather, several significant effects, none of which was overwhelming, combined to create a net small improvement in funded status,” the report states.
A 40-basis-point increase in the median discount rate in 2015 to 4.4% helped offset weak investment returns. The average investment return on the pension fund assets for the 20 corporations reviewed was roughly 1%.
Currency moves also meant the value in U.S. dollars of non-U.S. assets and liabilities fell in 2015.
The report also looked at the companies' pension fund contributions and found they contributed a total of $13.4 billion to their pension funds in 2015, a significant drop from previous years, which the report attributed to legislative funding relief. In 2014, the companies contributed a total of $18.5 billion to their pension funds.
The report also pointed to corporate deals that resulted in a net decrease in collective assets and liabilities in 2015, such as Hewlett-Packard Co.'s lump-sum offer to former employees who had yet to retire, which settled about $810 million in U.S. defined benefit plan liabilities.
A full copy of Russell's findings, including the constituents of the club, is available on Russell's website.
