A Watson Wyatt Worldwide analysis of financial statements filed by sponsors of the 100 largest pension plans found that plans, on average, were 75 percent funded at the end of 2008, a big drop from the prior year, when plans on average were 103 percent funded. Pension plan size was based on plan liabilities at the end of 2007.
While 80 percent of plan sponsors had pension programs at the end of 2007 that were more than 90 percent funded, by the end of 2008, only 14 percent of sponsors reported that their plans were more than 90 percent funded.
In all, the plans had a $217 billion deficit at the end of 2008. That marked a huge change from the end of 2007, when the plans had a surplus of $86 billion, according to the analysis.
Because of slumping funding levels and a recent law change that toughened funding rules, employers face huge increases in the amount of money they will have to contribute to their plans.
The combination of severe market declines and the new rules “will require employers to make staggering pension contributions over the next couple of years, at a time when they can least afford them,” David Speier, a senior retirement consultant with Arlington, Virginia-based Watson Wyatt, said in a statement.
Congress last year slightly eased the 2006 law’s funding requirements, but so far federal legislators have not responded to business groups’ pleas for a greater relaxation of those rules.