Funded status of corporate plans plummets in first quarter

The dramatic downturn in markets driven by the coronavirus outbreak caused the funded status of corporate plans to drop to the lowest level it's been since 2012, according to reports from Willis Towers Watson and Barrow, Hanley, Mewhinney & Strauss.

As measured by Willis Towers Watson, the aggregate pension funded status of the largest corporate pension plans in the U.S. is estimated to have fallen by 8 percentage points to 79% as of March 31 from 87% in Dec. 31.

"It's one of the worst quarters ever for pension plan sponsors," said Royce Kosoff, managing director for retirement at Willis Towers Watson.

This estimated funded status marks the lowest funded status plans have experienced since 2012, when the year-end funded status stood at 77%.

Mr. Kosoff added that how plans fared in the quarter was driven by how they were allocated.

"Those that derisked before (markets were hit) have the best chance of weathering the storm," Mr. Kosoff said. "Those unable to derisk in time will be hit the most."

Meanwhile, money manager Barrow, Hanley, Mewhinney & Strauss estimated the average U.S. corporate pension plan funding ratio as of March 31 dropped to 77.9% from 88.7% as of Dec. 31. Barrow Hanley's report cited equity losses from the coronavirus pandemic caused funded status to fall to a level not seen since 2012.

The estimate was calculated using the most recent 10-K filings from Russell 3000 companies and estimating the funding ratios using the following asset allocation with asset classes' associated indexes: 29% long-duration fixed income, 28% domestic equities, 15% international equities, 10% core fixed income, 6% hedge funds, 5% private equity, 3% each cash and commodities and the remainder in real estate investment trusts.

By industry, Barrow Hanley said the average funding ratio as of March 31 was highest among banks at 94.6% and lowest among airlines at 66.2%.