<!-- Swiftype Variables -->

Pension Funds

Corporate pension funding on the upswing in 2017 – 3 reports

The funded status of U.S. corporate pension plans rose in 2017 as asset growth outpaced liabilities, said reports from Mercer, Northern Trust Asset Management and Aon Hewitt.

According to Mercer, the estimated aggregate funding ratio of defined benefit plans sponsored by S&P 1500 companies rose 2 percentage points over the year to 84%.

Assets rose 7.7% over the year to $1.95 trillion, outpacing liabilities, which rose 5.4% to $2.33 trillion.

The S&P 500 and MSCI EAFE indexes returned 21.83% and 25.6%, respectively, in 2017. Discount rates fell 48 basis points over the year to 3.56%.

As measured by Northern Trust, the average funding ratio for S&P 500 companies with corporate DB plans rose 2.9 percentage points in 2017 to 82.9%.

The funding increase was driven by an approximately 24% return from global equities, which offset an approximately 50-basis-point drop in discount rates. Liabilities rose 10.5% over the year, driven primarily by the falling discount rates, Northern Trust said.

According to the Aon Hewitt Pension Risk Tracker, the aggregate funded status for DB plans sponsored by S&P 500 companies rose 80 basis points over the year to 81.7%.

Asset values increased 8.2% over the year to $1.788 trillion, while liabilities rose 7.1% to $2.188 trillion.

"Looking forward to 2018, we think most plan sponsors will be taking a serious look at accelerating contributions given the recent passage of tax reform," said Scott Jarboe, a partner in Mercer's wealth business, in a news release on the funding results. "Plan sponsors have a limited window to take advantage of higher deductions and avoid the significant increase in the after-tax cost of pensions. Contributions will serve to boost funded status, and we believe they will fuel investment policy changes to derisk financials and more risk transfer activity in an already vibrant market."