Willis Towers Watson conducted a study of pension plan data for 376 Fortune 1000 companies that sponsor U.S. DB plans (RDK’s editorial comment: really too bad that only 376 of top Fortune 1,000 offer a DB plan). Results of the study indicate that the aggregate pension funded ratio is estimated to be 79% as of March 31. This is a significant drop from 87% registered at year-end. This level of funding marks the lowest funded status plans have experienced since 2012, when the year-end funded status stood at 77%.
The 376 plans now have an estimated pension deficit of $365 billion as of March 31, which is dramatically greater (up $136 billion) than the $229 billion deficit at the end of last year. Unlike pension asset values that plummeted, pension liability growth was more muted despite falling interest rates, as corporate bond spreads widened considerably. The total estimated liability stands at $1.76 trillion up from $1.75 trillion at December 31, 2019.
What I find most disconcerting about this result is the fact that Corporate America has done a much better job of taking risk off the table. I can only imagine the hit that DB plans in the public and multiemployer space took as a result of having much more aggressive asset allocations that favor equities and equity-like products relative to fixed income. Furthermore, both public and multiemployer plans entered this market disruption in poorer shape than Corporate plans.