Largest corporate DB plans see no gains in funding
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Directional signs respresenting types of traditional and alternative investments
      Setter: Alternative secondary deals drop 27.7% in 2020
      Kennedy Lewis raises $2.1 billion for latest opportunistic credit fund
      Emma Davies
      Octopus Ventures chooses co-CEO
      BEX Capital brings on head of origination
    • Amy Hsiang
      Meketa picks new public markets manager research director
      Will Martindale
      Cardano Group chooses group head of sustainability
      Meketa hires first chief marketing officer
      Nick Horsfall
      Redington names managing directors for investment consulting team
    • Multiemployer pension plans could soon see relief
      Yellen calls for more COVID relief, retirement access
      A healthcare worker provides care for a COVID-19 patient in the intensive care unit at the Saint Joseph hospital in Marseille, France, on Nov. 20, 2020.
      World must act to strengthen against future pandemics – report
      New York State Common challenges Tyson’s dual-share stock structure
    • Kenneth J. Munro III
      Empower names new national sales director
      Fidelity cuts target-date asset threshold for lower fees
      DCIIA looks to spark engagement with plan sponsor institute
      Ascensus, Empower acquire Truist record-keeping business
    • LaSalle Investment Management taps 2 for new ESG roles
      Sovereign credit ratings vulnerable to ESG risks — Moody’s
      JPMAM names head of investment stewardship, Asia ex-Japan
      New law requires MassPRIM to increase diversity of managers, consultants
    • Blackstone holiday video
      Blackstone would like to show you how things are done around the office
      Galina Churkina
      Building research earns honor from Aquila Capital
      MacArthur Foundation invests in women’s safe housing fund
      CAIA’s expansion to online exams yields big results
    • Shanghai skyline
      Global hedge funds struggle even in a more open China market
      The Sun Hung Kai Properties Ltd. logo is displayed on the Sun Hung Kai Centre building in Hong Kong on Sept. 13, 2018
      SHK spins out East Point Asset Management
      Man holding a business card with Hedge Fund written on it
      Hedge funds chalk up decade’s best returns in 2020 – HFR
      New hedge fund launches surpass liquidations in third quarter
    • Nuveen sells holdings in sanctioned Chinese stocks
      Biden team to review Labor Department ESG rule
      Chicago Transit Authority drives search for discretionary investment consultant
      Directional signs respresenting types of traditional and alternative investments
      Setter: Alternative secondary deals drop 27.7% in 2020
    • Standard Life Aberdeen CEO Stephen Bird
      Standard Life Aberdeen CEO: Some staff won’t get bonuses
      Nuveen sells holdings in sanctioned Chinese stocks
      Northern Trust to take $55 million charge for job cuts
      Michaela Collet Jackson
      Columbia Threadneedle chooses first head of distribution for EMEA
    • Ohio Public Employees returns 11.35% in 2020
      Wisconsin ETF picks new secretary
      State plan funding ratios jump in Q4
      CalPERS records 12.4% return in 2020
    • Kenneth J. Munro III
      Empower names new national sales director
      Michaela Collet Jackson
      Columbia Threadneedle chooses first head of distribution for EMEA
      Wisconsin ETF picks new secretary
      Amy Hsiang
      Meketa picks new public markets manager research director
    • Pension funds continue private equity investing spree
      Big jump in private equity AUM expected over next 5 years
      Thoma Bravo takes in $22.8 billion for 3 funds
      Jason Thomas
      Data, technology become new prized possessions
    • Chiang Ling Ng
      Hines hires first head of Asia-Pacific real estate investments
      Brand new apartment building on sunny day in spring with blooming trees
      Real estate returns forecast to trend lower – report
      Ivanhoe Cambridge Inc. signage is displayed outside the company's office near Bay Street in Toronto on Aug. 29, 2011
      Ivanhoe Cambridge, PAG announce joint venture for Japan logistics investments
      Residential buildings in Hong Kong on Feb. 20, 2020
      KKR closes first Asia-Pacific real estate fund at $1.7 billion
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • Outlook 2021
      The top 10 stories of 2020
      The best places to work in money management
      Investment consultants
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Fresno County puts $150 million into 2 real estate funds
      Chicago Transit Authority drives search for discretionary investment consultant
      Finland’s Varma chooses Nordea for emerging market equities
      Texas County & District picks direct lending fund for first 2021 commitment
    • Fresno County puts $150 million into 2 real estate funds
      Chicago Transit Authority drives search for discretionary investment consultant
      Finland’s Varma chooses Nordea for emerging market equities
      Texas County & District picks direct lending fund for first 2021 commitment
    • International Small Cap Manager Services
      Financial Expertise
      Passive Index Manager Services
      Emerging Markets Equity Investment Management Services
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      view gallery
      25 photos
      2020 in editorial Cartoons
      view gallery
      25 photos
      Cartoons depict a year like no other
      Consultants cartoon
      Seeking an investment consultant? Caveat emptor
    • GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
      Gold Outlook 2021
      Bond ETFs show maturity during Covid market mayhem
      2021 Outlook: A rousing recovery
    • Charles E.F. MIllard
      Commentary: It’s time to make 401(k) plans into real pension plans
      Michael McNally
      Commentary: New ‘investment-plus’ test poses risks to private equity investors
      Adam Waterous
      Commentary: Institutions urged to act now on opportunities created by current global oil disruption
      Ron Lagnado
      Commentary: Straw man critiques don’t hold up in face of real world success
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
      Sponsored Content By Aberdeen Standard Investments
      Taking a passive approach to the hedge-fund universe
      Sponsored Content By World Gold Council
      Gold: the most effective commodity investment
      Sponsored Content By Moody's Analytics
      The Industrialization of ESG Investment
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:24
      U.S. stocks were 2020’s comeback kid
      watch video
      1:23
      Outlook 2021
      watch video
      1:52
      Buy gold's pullback?
      Coronavirus and the S&P 500: 2020
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
    • POLL: Retirement issues in 2021
      POLL: Money managers' priority in Asia-Pacific region
      POLL: Retirement issues in the presidential election
      POLL: The S&P 500 in the third quarter
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      Graphic: U.S. stocks were 2020's comeback kid
      U.S. fixed-income returns post another positive year
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. DEFINED BENEFIT
April 18, 2016 01:00 AM

Largest corporate DB plans see no gains in funding

Liability decrease muted by lower contributions, returns

Trilbe Wynne
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Kiyung Park
    Bob Collie says contributions made by large companies in 2015 weren't enough to boost funding or even cover costs.

    In a year when the nation's largest corporate defined benefit plans saw a 5.7% aggregate decrease in liabilities, funding levels barely budged. The culprit: a combination of low returns that hovered around zero and declining contributions for the third straight year.

    The average funding ratio ended 2015 at 85.1%, down from 85.7% in 2014, even as the average discount rate increased 34 basis points to 4.39% in 2015, according to Pensions & Investments' annual analysis of SEC filings. The aggregate funding ratio also decreased to 82.1% from 82.7% the previous year.

    Sixty-two of the 100 plans in P&I's universe reported a negative return on plan assets, with an average return of -0.31%.

    Meanwhile, aggregate contributions by the plans in P&I's universe fell to $21.8 billion, from $28.4 billion in 2014, $31.7 billion in 2013 and $47.4 billion in 2012.

    Dips in the funding ratio have not been accompanied by increased pension fund contributions since temporary federal funding relief lowered regulatory minimums by allowing companies to use higher interest rates to calculate liabilities.

    “What we're seeing is that people are really taking advantage of the pension smoothing,” said Bob Collie, chief research strategist, Americas institutional, at Russell Investments in Seattle. Contributions made by large plan sponsors that the firm tracks in 2015 were not only insufficient to affect the funded status, they were too low to cover costs.

    “The contributions were less than the value of the new benefits that have accrued,” he said.

    Other industry observers viewed the relative stability in the funding ratios as a welcome development after a decade of volatility.

    “The more plans have derisked the more they've been inoculated from market volatility,” said David Eichhorn, managing director, investment strategies, and a member of the investment committee at NISA Investment Advisors LLC in St. Louis. Although some plans have taken more action than others, overall, corporate DB plans are better protected against uncertain market returns and interest-rate risk than they were 10 years ago, he said.

    Pension risk transfers continued in 2015, with firms offering lump sums or purchasing group annuities from insurance companies.

    The average allocation to fixed income, which acts as a liability hedge, was 39.2% in 2015, up 11.7 percentage points from the 27.5% average allocation to fixed income in 2005.

    In 2014, corporate plans had a 38.5% percent average allocation to fixed income.

    Corporate pension plan funded status

    The largest corporate pension plans ranked by funding ratio -- plan assets as a percentage of benefit obligation -- as of Dec. 31, 2015, unless otherwise noted. Contribution data are in millions.

    RankFund sponsorFunding ratio2015

    contribution

    Expected 2016 contribution

    1NextEra Energy148.0%$0$0
    2BB&T125.8%$126$280
    3Bank of America124.2%$0$0
    4J.P. Morgan Chase118.6%$31$0
    5BNY Mellon 112.3%$19$22
    6Alcatel-Lucent108.1%$33
    7WestRock1105.9%$111$52
    8Duke Energy105.3%$302$145
    9Emerson Electric1103.2%$85
    10Prudential Financial102.6%$162$140
    11Target2101.4%$203$0
    12J.C. Penney298.8%$0$0
    13PNC Financial Services98.2%$200$0
    14Aetna97.6%$22$60
    15IBM97.4%$0$0
    16Morgan Stanley97.0%$31$50
    17Dominion Resources96.5%$3$0
    18Travelers 96.2%$100$0
    19American Electric Power95.5%$98$96
    20Merck95.3%$66$50
    21Honeywell International94.5%$34$0
    22Goodyear93.9%$0$0
    23Eastman Kodak92.5%$0$0
    24General Mills392.1%$24$0
    25Ford91.8%$130$0
    26Deere491.6%$83$73
    27Public Service Enterprise Group91.3%$25$21
    28Macy's290.8%$0$0
    29Union Pacific89.5%$100
    30WEC Energy89.4%$108$24
    31Textron589.2%$55$60
    32Bristol-Myers Squibb88.6%$118$100
    33Kimberly-Clark88.6%$484$100
    34U.S. Steel88.5%$0
    35Weyerhaeuser88.4%$60$0
    36Kraft Heinz688.2%$227$160
    373M88.1%$113$100
    38Southern Co.87.6%$45$0
    39R.R. Donnelley87.6%$15$28
    40United Technologies87.5%$520$175
    41PepsiCo87.4%$66$150
    42Allstate87.3%$125$129
    43Hewlett-Packard487.1%$29$37
    44Citigroup87.0%$0$0
    45Ameren87.0%$111$55
    46Abbott Labs86.6%$579$470
    47ConAgra386.5%$14$13
    48Johnson & Johnson86.1%$752$76
    49FedEx385.4%$746$660
    50General Motors85.4%$95$2,000
    51Eli Lilly85.3%$404$45
    52PG&E84.3%$334$327
    53Coca-Cola84.0%$121$0
    54Altria Group 83.7%$28$53
    55PPL83.5%$158$30
    56MetLife83.3%$424$300
    57CenturyLink82.9%$100$0
    58Wells Fargo82.8%$7$0
    59Northrop Grumman82.1%$578$79
    60American International Group81.9%$558$67
    61Huntington Ingalls81.9%$103$167
    62Consolidated Edison81.8%$750$469
    63Xcel Energy80.8%$90$125
    64Exelon80.8%$462$250
    65Cigna80.7%$6$0
    66Reynolds American79.4%$18$335
    67UPS78.4%$1,048$1,161
    68Pfizer 77.9%$1,000$1,000
    69The Hartford77.3%$101$0
    70DTE Energy77.1%$183$35
    71Eversource Energy76.9%$155$146
    72Alcoa76.7%$479$218
    73AT&T76.1%$735$0
    74Walt Disney776.1%$337$900
    75CBS76.0%$52
    76Boeing76.0%$59$100
    77Chevron75.8%$641$650
    78International Paper75.7%$813
    79Raytheon74.3%$539$140
    80Lockheed Martin73.4%$5$25
    81Verizon Communications73.2%$744$600
    82Dow Chemical73.2%$844$620
    83Marsh & McLennan73.2%$29$0
    84Motorola72.7%$3
    85Caterpillar72.4%$30$30
    86U.S. Bancorp72.2%$436$348
    87Unisys71.9%$66$53
    88Harris Corp.69.3%$1$175
    89ConocoPhillips69.1%$73$220
    90Entergy68.7%$396$388
    91General Dynamics68.6%$187$200
    92Baxter68.2%$157$600
    93Sempra Energy68.1%$33$126
    94DuPont67.1%$308$230
    95General Electric66.5%$233$0
    96Sears 260.6%$299$318
    97American Airlines59.2%$6$0
    98FirstEnergy 58.8%$161$381
    99Exxon Mobil56.1%$0$2,000
    100Delta Air Lines45.5%$1,219$1,000
    Average82.1%

    Notes: 1 Data are as of Sept. 30, 2015; 2 as of Jan. 30, 2016; 3 as of May 31, 2015; 4 as of Oct. 31, 2015; 5 as of Jan. 2, 2016; 6 as of Jan. 3, 2016; 7 as of Oct. 3, 2015.

    Source: Company reports

    Adjusting allocations

    Goodyear Tire & Rubber Co., Akron, Ohio, had the highest fixed-income allocation on P&I's list, with 89% of the plan's $5 billion in assets allocated to fixed income in 2015.

    After freezing its plans for U.S. hourly workers and making a $1.2 billion contribution in 2014, Goodyear “changed its target asset allocation for these plans to a portfolio of substantially all fixed-income securities designed to offset the future impact of discount rate movements on the plans' funded status,” the company's 10-K said in 2014.

    Goodyear had $5.34 billion in liabilities and a funding ratio of 93.9% in 2015, with allocations of 5.9% to private equity, 4.8% to cash, 0.2% to other investments and 0.1% to equities.

    In 2015, 41 plans on P&I's list had fixed-income allocations of 40% or more.

    Although not all plans have committed to a liability-driven investment strategy, Mr. Eichhorn said that, on average, most corporate plans have taken some action over the past decade to offset market volatility and interest rate changes.

    “While risks remain, there have been meaningful steps over the past 10 years that have helped inoculate plans against volatility in the markets. Some plans are nearly fully insulated. They've basically derisked and they're at their end state,” Mr. Eichhorn said.

    Other plans bet less on fixed-income holdings.

    Weyerhaeuser Co., Federal Way, Wash., with more than 60% of its assets in hedge funds, had one of the highest returns for the year ended Dec. 31 at 4.1%, or $226 million, which helped bump up the plan's funding ratio to 88.4% from 84.2% in 2014.

    With $3.44 billion of its $5.49 billion in assets allocated to hedge funds in 2015, Weyerhaeuser had the highest allocation to alternatives for the second consecutive year. The allocation to hedge funds increased 2.1 percentage points in 2015 to 62.6%. In addition to hedge funds, the plan allocated 23.1% to private equity, 13% to fixed income, 1.2% to real estate and 0.1% to equities.

    Merck & Co. Inc., Kenilworth, N.J., had the most aggressive equity allocation in 2015 at 80.2%, including a 7.8% allocation to international equities. Assets dropped $226 million for the year, or a -2.44% return on its $9.27 billion portfolio. Despite the negative return, Merck's funding ratio rose to 95.3% in 2015 from 93.9% following a 60-basis-point rise in the discount rate to 4.8% that reduced liabilities to $9.72 billion from the previous year's $10.63 billion. Other asset allocations were 17.5% to fixed income, 2% to cash and 0.3% to other investments.

    The aggregate allocation to equities in P&I's universe was 34.7% in 2015 vs. 35.8% in 2014; the overall allocation to alternatives increased to 18% from 16.8% the previous year; private equity declined to 5.8% from 6.3%; hedge funds for the top 100 plans increased slightly to 5.3% from 5.2%; real estate increased to 4.5% in 2015 from 3.9%; cash had the same 3.6% allocation in both years; and the allocation to other investments was 2.7% in 2015 vs. 2.6% in the previous year.

    The average long-term assumed rate of return on plan assets also dropped in 2015. The average declined to 7.32% from 7.51% in 2014, 7.55% in 2013, 7.73% in 2012 and 7.94% in 2011.

    Sponsors have time

    Given the plans' long horizons, sponsors have time to meet their obligations, one expert said.

    “We're talking about decades, many, many decades, before these (benefits) are to be paid out,” said Alan Glickstein, Dallas-based senior retirement consultant at Willis Towers Watson PLC.

    Mr. Glickstein said volatile markets and more frequent revisions of actuarial assumptions mean annual reports should be considered a point-in-time measurement, rather than an absolute judgment of a plan's funded status.

    NextEra Energy Inc., Juno Beach, Fla., had the highest funding ratio in 2015, at 148%, with $3.56 billion in assets and $2.41 billion in liabilities. Although the funding ratio dropped 1.63 percentage points from the previous year, 2015 was the company's 11th-straight year at the top of P&I's list.

    Financial services companies made up the remaining four of the five highest-funded plans.

    BB&T Corp., Winston-Salem, N.C., had the second-highest funding ratio at 126%. Assets rose 5% to $4.4 billion in 2015, but liabilities also increased 9% to $3.5 billion despite the plan's 41-basis-point discount rate increase to 4.68%.

    Rounding out the top five, Bank of America Corp., New York, had a funding ratio of 124.2%, with $17.96 billion in assets and $14.46 billion in liabilities; J.P. Morgan Chase & Co., New York, 118.6%, with $14.13 billion in assets and $11.91 billion in liabilities; and The Bank of New York Mellon Corp., New York, at 112.3%, with $4.69 billion in assets and $4.18 billion in liabilities.

    Transferring risk

    The continuing trend of pension risk transfer contributed to 2015's aggregate drop in assets and liabilities. Aggregate liabilities of the plans in P&I's universe decreased 5.65% to $1.367 trillion in 2015 from $1.449 trillion; aggregate assets fell by 6.39% to $1.122 trillion from $1.199 trillion in 2014.

    Kimberly-Clark Corp., Dallas, contributed $410 million in 2015 and purchased group annuity contracts that transferred pension benefit obligations totaling $2.5 billion for about 21,000 U.S. retirees to Massachusetts Mutual Life Insurance Co. and Prudential Insurance Co. of America. At the end of 2015, Kimberly-Clark's pension liabilities dropped to $3.96 billion from $6.86 billion the previous year, plan assets were lowered to $3.51 billion from $5.91 billion, and the plan's funding ratio went up to 88.6% from 86.2%.

    Also, J.C. Penney Co. Inc., Plano, Texas, offered a lump-sum window to about 31,000 retirees and beneficiaries in September 2015 and, a month later, purchased a group annuity contract from Prudential to transfer the pension obligations of about 43,000 retirees and beneficiaries. The plan's funding ratio dropped to 98.8% at the end of 2015 from 104.2% the previous year and plan assets fell to $3.29 billion from $5.47 billion. But the risk-transfer transactions lowered pension liabilities to $3.33 billion from $5.25 billion.

    Plans that remain underfunded are facing increased premium payments to the Pension Benefit Guaranty Corp., said Justin Owens, Russell's Seattle-based senior asset allocation strategist. The Bipartisan Budget Act of 2015 raised variable-rate PBGC premiums to $30 per $1,000 of underfunding in 2016, up from $24 per $1,000 in 2015, with the premium eventually rising to $41 per $1,000 by 2019. As recently as 2013, the variable rate was $9 per $1,000 of underfunding. The fixed-rate premium of $64 per participant in 2016 will rise to $80 per participant in 2019. As recently as 2012, it was $35 per participant.

    More take action

    As higher PBGC premiums make underfunded status more expensive, Mr. Owens expects to see more sponsors take action to increase the funding ratio, including contributing more than the regulatory amounts. “People are being forced to re-evaluate that minimum-funding policy,” he said.

    General Motors Co., Detroit, plans to contribute $2 billion to its U.S. hourly defined benefit plans by mid-2016, “which is expected to be financed by debt,” according to the company's 10-K. GM made $95 million in contributions during 2015 to its pension plans, which had $61.1 billion in assets and $71.5 billion in liabilities, for a funding ratio of 85.4% at the end of the year.

    Mr. Owens said corporate strategies to increase contributions, including issuing new debt to take advantage of low interest rates, could be more cost effective than paying more to the PBGC.

    “With the rising PBGC premiums, if the sponsor just pays the minimum requirement, in effect, it's a tax,” he said.

    Only three companies contributed $1 billion or more in 2015, down from eight companies the previous year. Delta contributed $1.22 billion; United Parcel Service Inc., Atlanta, $1.16 billion; and Pfizer Inc., New York, contributed $1 billion in 2015.

    Contributions made a difference for American International Group Inc., New York. AIG saw the highest funding ratio increase for the year, with a 10.61 percentage point jump to 81.87%. Plan assets had a negative return of $8 million, but with a 38-basis-point increase in the plan's discount rate to 4.32% and $558 million in contributions, liabilities decreased 8% in 2015 to $5.32 billion, and assets increased 6% to $4.36 billion.

    In 2016, the plans in P&I's universe have announced $19.23 billion in expected contributions, a 33.4% increase compared with 2015's expected $14.42 billion.

    The two lowest-funded plans on P&I's list each expect to contribute more than $1 billion in 2016.

    Delta Air Lines Inc., Atlanta, plans to contribute $1 billion in 2016, including $500 million in discretionary contributions above its minimum-funding requirements. Delta's 45.5% funding ratio kept it at the bottom of P&I's list for the 11th-consecutive year, with $9.37 billion in assets and $20.61 billion in liabilities.

    Exxon Mobil Corp., Irving, Texas, expects to contribute $2 billion in 2016. Exxon was the second-worst funded plan on the list, with a funding ratio of 56.1%. It had $10.99 billion in assets and $19.58 billion in liabilities at the end of 2015.

    Going forward, AIG will use a different approach to determine pension interest costs, which the company's 10-K says will result in $52 million less in projected expenses for 2016. This new accounting method aligns the timing of the plan's discounted cash flows to the corresponding spot rates on a yield curve derived from the interest rates of investment-grade corporate bonds. n

    Related Articles
    LIMRA: U.S. corporate pension buyouts exceed $1 billion for fourth straight qua…
    Corporate pension plans' funding held steady in May — 3 reports
    U.S. corporate pension funding drops in second quarter
    Charting corporate funding status through the years
    Johnson & Johnson names CIO
    U.S. corporate pension funding declines slightly in April on rising liabilities…
    Phillips 66 DC plan replaces PIMCO with GSAM fund
    International Paper to sell bonds, contribute $500 million to pension plans
    Harris Corp. to contribute nearly $200 million to pension fund
    United Technologies to offload $1.8 billion in liabilities in pension buyout, l…
    PBGC, Alcoa agree on extra pension fund contributions
    AT&T, Time Warner deal would combine $89 billion in retirement assets
    International Paper pays out $1.2 billion in lump-sum payments to former employ…
    MSCI: North American companies have largest pension funding problem
    Unisys to pay out $216 million in lump sums to former employees
    FedEx to deliver $1 billion pension fund contribution from bond offering
    PepsiCo discloses annuity buyout in 2016; plans $130 million contribution to DB…
    Caterpillar digs up $450 million contribution for global DB plans in 2017
    Consolidated Edison lights up $423 million pension contribution for 2017
    PG&E powers up $327 million contribution to pension fund
    Phillips 66 fuels up $165 million to global pension plans
    Entergy to contribute $409 million to pension funds in 2017
    Recommended for You
    Underfunded public plans facing a new round of woes
    Underfunded public plans facing a new round of woes
    NISA pension surplus risk index, funding down in January
    NISA pension surplus risk index, funding down in January
    PPF 7800 index funding deficit falls in September
    PPF 7800 index funding deficit falls in September
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    Gold Outlook 2021
    Bond ETFs show maturity during Covid market mayhem
    Global gold-backed ETFs: A popular gateway to the gold market
    2021 Outlook: A rousing recovery
    Climate change and emerging markets after Covid-19
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center