The funded status of the 100 largest U.S. corporate pension plans rose to 87.1% at the end of 2018 from 85.8% at the end of 2017, according to the latest annual corporate pension funding study from Milliman.
Employers in Milliman's study continued last year's trend of large pension contributions, adding $57.5 billion in funds to their pension funds in 2018. This year saw three of the top 10 largest contributions in the history of the study, from AT&T ($9.3 billion, second-largest in the study's history), General Electric & Co. ($6.8 billion, the fourth largest), and Lockheed Martin Corp. ($5 billion). Employer contributions totaled nearly $120 billion over the last two years.
However, Milliman predicts that contribution levels will decrease in fiscal year 2019.
Despite the annual rise in the average funded ratio, asset performance in 2018 was the worst since 2008.
"We're accustomed to faulting the low discount rate climate and its negative effect on pension funding, but in 2018 discount rate increases as well as large plan sponsor contributions helped dig corporate pensions out of the funding hole created by investments losses," said Zorast Wadia, principal, consulting actuary and co-author of the corporate pension funding report, in a news release about the results. "In fact, this was the first time in our study's history that we had a negative asset return and yet corporate pension funding improved."
A large discount rate increase helped drive an overall pension funding improvement for plans in 2018, despite disappointing investment losses of 2.8%. The discount rate climbed 52 basis points in 2018, the second-largest annual increase since Milliman's began tracking funding.
Plans in the financial-services sector had an average funding ratio of 100%, while corporate pensions in industrials, energy and basic materials sectors had an average funding ratio below 85%, the study found.