The aggregate funded status of the 100 largest U.S. corporate defined benefit plans ended 2016 at 81.2%, down 70 basis points from the end of 2015, said Milliman's annual corporate pension funding study released Thursday.
Liabilities rose 3.24% to $1.718 trillion over the year, due partly to a 30-basis-point drop in the discount rate to 3.99%.
Assets, meanwhile, rose 2.37% to $1.395 trillion as investments returned 8.4%. For the 88 plans with Dec. 31 fiscal year-end dates, fiscal year returns ranged from 0.5% to 18.4%.
Differences in returns among the various plans could be explained by the plans' U.S. equity and U.S. corporate bond allocations, the report said, as U.S. equities greatly outperformed international equities and U.S. corporate bonds greatly outperformed U.S. government bonds and interest rate swaps in 2016.
The report also looked at companies' pension contributions, finding that companies contributed a total of $42.8 billion in 2016, up from $31.1 billion in 2015. A desire to reduce Pension Benefit Guaranty Corp. premiums may have played a role in the increase, Milliman said.
Seven companies' assets declined enough in 2016 that they were removed from the Milliman 100: CBS Corp., Computer Sciences Corp., RR Donnelley & Sons Co. Inc., J.C. Penney Co., Macy's Inc., PPG Industries Inc. and Sears Holdings Corp. The seven companies that were added were: Hewlett Packard Enterprise Co., Ameren Corp., Kimberly-Clark Corp., Molson Coors Brewing Co., Travelers Cos., U.S. Bancorp and Union Pacific Corp.
Other key findings from Millimans' report include:
- the sum of pension risk transfers and settlement payments was an estimated $13.6 billion in 2016, vs. $11.6 billion in 2015;
- among the companies reviewed, Delta Airlines Inc. had the lowest funded ratio at 49% and NextEra Energy Inc. had the highest, at 148%;
- only 38 of the 88 companies with Dec. 31 fiscal-year-end dates reported an increase in funded status in 2016, compared to 51 in 2015; and
- companies' pension expenses decreased 7.6% to an aggregate $30.8 billion in 2016.
Milliman's annual study reports revised year-end figures from its monthly reports.