Defined-benefit pension plans took a turn for the better last year, aided by the stock market’s healthy performance.
Wilshire Consulting’s annual study of defined-benefit plans that are sponsored by S&P 500 companies found that their average funding ratio rose to 101 percent at the end of last year, up from 93 percent at the end of 2005.
The S&P 500 defined-benefit plans ended 2006 with an aggregate surplus of $16.6 billion, the first since 2001, which compares with a deficit of $83.5 million at the beginning of the year.
The news is not all good. Some 71 percent of the S&P 500 plans remain underfunded, although that’s down from the 83 percent that were underfunded in 2005.
The improvement in the plans’ funding occurred as the growth in their assets outpaced the growth in liabilities. Assets increased by $132.5 billion, or 11.9 percent, a figure that includes the $36.3 billion that companies contributed to their plans. Liabilities grew $32.3 billion, or 2.7 percent.
Wilshire noted the plans had a median investment return of 11.5 percent in 2006, up from 8.5 percent in 2005 and 10.8 percent in 2004.
Filed by Susan Kelly of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
