The funding ratio of 20 U.S. publicly listed corporations with more than $20 billion in global pension fund liabilities dropped to an average 84.9% at the end of 2019, down from 85.3% at the start of the year, according to a report from Russell Investments.
While global equities returned 27% for the year, the roughly 100-basis-point drop in discount rates negatively affected the funding ratios overall.
Assets for the "$20 billion club" totaled $830.2 billion as of Dec. 31, up 9.4% from the start of the year, and projected benefit obligations totaled $981 billion, also up 9.4% from the start of the year.
Contributions by the 20 corporations totaled $11.9 billion for 2019, significantly below the $28.1 billion in contributions recorded in 2018 and the $37.5 billion in contributions in 2017.
The lower contributions for 2019 had been expected since companies during the prior two years had been motivated by the passage of the Tax Cuts and Jobs Act of 2017 to bundle several years' worth of minimum required contributions into a single year in order to deduct those contributions at the higher corporate tax rate of 35% by the tax deadline of Sept. 15, 2018.
Contributions are expected to be slightly higher for 2020, primarily due to the high contribution announced by General Electric Co., Boston, which has committed to paying an additional $4 billion to $5 billion into its pension plan this year.
Overall, considering the excellent equity returns for 2019, the end results are disappointing, a news release said.
"The net effect is that funded status stayed roughly the same for the $20 billion club, likely frustrating sponsors who saw assets increase without a corresponding increase in funded position," said Justin Owens, director of investment strategy and solutions at Russell, in the news release.