The average funded status of the largest U.S. corporate pension plans rose an estimated 2 percentage points in 2017 to 83% as of Dec. 31, the highest level since 2013, and up from 81% at the end of 2016, Willis Towers Watson said Tuesday.
"Strong stock market performance throughout the year and robust employer contributions to their pension plans helped to boost funded status to its highest level since 2013 after several stagnant years," said Matthew Siegel, a senior consultant, in a news release. "Several plan sponsors contributed more to their plans last year than originally expected, most likely in response to rising Pension Benefit Guaranty Corp. premiums and growing interest in derisking strategies, and potentially in anticipation of lower future corporate rates from tax reform."
"The improved funded position occurred even though pension discount rates finished the year down approximately 50 basis points from the beginning of the year," Mr. Siegel added.
According to Willis Towers Watson, assets rose an estimated 7.5% over the year to $1.43 trillion while liabilities increased an estimated 4.2% to $1.72 trillion. Investment returns averaged 13% in 2017.
By asset classes, domestic large-cap equities returned 22%; domestic smidcap equities, 17%; long corporate bonds, 12%; long government bonds, 9%; and aggregate bonds, 4%.
Regarding company contributions, Willis Towers Watson estimated that companies contributed $51 billion to their pension funds in 2017, almost double the amount required to cover benefits accrued over the year, and up from the $43 billion companies contributed in 2016.
Willis Towers Watson analyzed data from 389 Fortune 1000 companies with a fiscal year ended Dec. 31.