Corporate pension plans battered in ’08

Corporate pensions lost five years of gains last year, according to data released by Milliman Inc., the global actuarial and consulting firm, from its annual pension funding study.

The Milliman 100 Index, which tracks the nation’s largest corporate defined benefit plans, recorded losses of more than $300 billion in 2008,
“Asset losses drove a decrease in funded status from about 106% at the end of 2007 to less than 80% at the end of 2008,” study co-author John Ehrhardt said in a statement.
Losses have continued with more than a $30 billion decrease in funded status in the first two months of this year, the firm reported.
“At the end of February, the funded status of the Milliman 100 pension plans stood at 74%, the lowest level since May 2003,” Mr. Ehrhardt said.
The loss in funded status in 2008 is projected to produce an increase in pension expenses for 2009 and a charge to corporate earnings in excess of $70 billion.
Employer contributions to the plans increased to $29.7 billion in 2008, compared with $27.2 billion in 2007.
The losses in funded status during 2008, coupled with the new funding requirements under the Pension Protection Act of 2006, are projected to increase required contributions to more than $50 billion for 2009.
The percentage of pension plan assets invested in equities declined to 44% in 2008, from 55% the previous year.
“The decrease in equity allocations is primarily due to market declines and, to a much lesser extent, a change in investment policies,” study co-author Paul Morgan, a senior consultant and director at Evaluation Associates LLC, a Norwalk, Conn.-based subsidiary of Milliman, said in a statement.