U.S. corporate pension plan funding ratios remained steady in 2022 despite significant market volatility, according to a new analysis from Willis Towers Watson.
The analysis, which examined pension plan data from 356 Fortune 1000 companies, estimated their aggregate funding ratio to be 95% at the end of 2022, the same as a year earlier.
According to the analysis, Willis Towers Watson estimated that the pension plans finished 2022 with $1.22 trillion in assets, down 26% from $1.65 trillion a year earlier, but pension liabilities also declined 26%, down to $1.28 trillion at the end of 2022 from $1.73 trillion a year earlier.
The fall in liabilities was due to rising interest rates, which helped offset asset losses coming from poor market returns.
"Plan sponsors are going to see in aggregate a pretty static funding ratio on their balance sheets," said Joanie Roberts, senior director, retirement, at Willis Towers Watson, in a phone interview, "but what's important to consider though is going into 2023 there are going to be some other impacts that plan sponsors are going to want to think about."
One impact, Ms. Roberts said, is a risk for higher-than-expected required minimum contributions as a result of the loss in assets.
The Willis Towers Watson analysis estimated that overall investment returns averaged -19% in 2022. The decline in assets was also accelerated by a record year in pension buyout transactions along with lower cash contributions.