Aside from the large GE contribution, most corporations reduced their expected contributions for 2020 when compared with 2019 and 2018. The 46 companies P&I analyzed at the beginning of 2018 planned to contribute a combined $17.4 billion to their plans, and in 2018, 66 companies said they would contribute more than $100 million, for a total of $38 billion.
Among the 10-K filings analyzed, for example, Caterpillar Inc., Peoria, Ill., which contributed $1.5 billion to its U.S. plans in 2019, expects to contribute only $40 million to those plans in 2020. The company expects to contribute $150 million to its non-U.S. plans in 2020, compared with $143 million last year. As of Dec. 31, U.S. pension plan assets totaled $15.99 billion, while projected benefit obligations totaled $17.77 billion, for a funding ratio of 90%, up from 80% a year earlier.
Other companies that made large contributions in 2018 or 2017 have not had to make any minimum required contributions this year or last year.
Companies made those large contributions in 2018 and 2017 for the most part to take advantage of tax breaks that were set to expire due to the passage of the Tax Cuts and Jobs Act, signed into law by Mr. Trump in December 2017. The law reduced the corporate tax rate to 21% from 35%.
Because tax law allowed plan sponsors to deduct a portion of their pension contributions based on its tax rate, corporations poured billions into their pension plans to meet the Sept. 15, 2018, tax deadline to deduct contributions at the higher 2017 rate.
Because many corporations had fulfilled their minimum required contributions for multiple years, the number of companies expecting to contribute $100 million or more to their plans has fallen from a peak of 66 companies in 2018.
Overall, the S&P 1500 companies that have defined benefit plans contributed a total of about $70 billion to those plans in fiscal year 2018, said Scott Jarboe, a Washington-based partner in Mercer's U.S. wealth business, in a telephone interview. That total dropped to about $45 billion in fiscal year 2019, he said.
"When you make those extra contributions, in some cases you can use those contributions to give you a little bit of relief for a number of years," Mr. Jarboe said.
It is likely too soon to tell whether the market downturn will lead to fewer contributions since the minimum required contributions for 2021 will be calculated as of Dec. 31 of this year.
Bethesda, Md.-based Lockheed Martin Corp., for example, contributed $5 billion to its U.S. pension plans in 2018, which included required and discretionary contributions. The company originally announced its intention to do so in January 2018, well above the $1.5 billion it originally announced for the year in October 2017 before the passage of tax reform.
Lockheed Martin said at the time it would not have to make any further contributions to its U.S. plans until 2021.
UPS also made an additional contribution of $5 billion to its U.S. plans at the end of 2017 to bring its total to $7.3 billion for the year.
Other corporations were also able to accelerate their contribution schedules and reduce or eliminate the need for contributions in 2019 and 2020.
Additionally, spectacular investment returns offsetting lowering discount rates in 2019 reduced the perception of a need for contributions in 2020.
The S&P 500 total return index increased 28.9% and the MSCI EAFE total return index increased 18.4% in the year ended Dec. 31, while the typical discount rates for plans as measured by Mercer's yield curve decreased 101 basis points during the period to 3.18%.