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Top 1,000 Funds Drop Close to $1 Trillion

Troubled equity markets push plans to record losses; top 200 DB plans fall 16.5 percent, while DC plans lose 13.7 percent.

January 26, 2009
Related Topics: Financial Impact, Benefit Design and Communication, Latest News
U.S. retirement funds lost almost $1 trillion of their value in the year ended September 30, the worst decline in the 30 years Pensions & Investments has tracked the largest 1,000 plans.

The fourth quarter of 2008 made it worse: P&I estimates that assets of the plans fell an additional $754 billion, or 11.8 percent. That puts the total loss at $1.7 trillion, or 23.3 percent, for the 15 months ended December 31.

The bad news:

* Aggregate assets of the 1,000 largest U.S. retirement plans dropped $965 billion, or 13.1 percent, to $6.4 trillion as of September 30, from the prior year.

* Assets of P&I’s top 200 funds declined 15.9 percent to $4.7 trillion as of September 30, also the worst in the past 30 years.

* Aggregate defined-benefit plan assets among the top 200 dropped 16.5 percent to $3.7 trillion in the year ended September 30, the worst in the 20 years for which P&I has tracked the breakdown between defined-benefit and defined-contribution plans.

Defined-contribution plan assets of the top 200 also declined, but by a slightly more palatable 13.7 percent, or $164 billion.

Since 1979, there were only two other years in which P&I’s data showed a decrease in the assets of the 1,000 largest funds: In 2001, assets dropped 12.7 percent from the prior year’s survey, and in 2002 assets dropped 9.7 percent.

For the top 200, 2008’s decline was 1,500 basis points worse than the previous low—September 30, 2001—when assets declined 14.4 percent. Indeed, growth of assets of the largest 200 retirement plans was positive or down just 1 percent until 2001, and again in 2002, when assets declined 10.9 percent.

The decline in the top 200 defined-contribution plan assets in the 12 months ended September 30 also was the worst experienced by this part of the institutional market. The next-worst drop in the assets held by the largest defined-contribution plans occurred in the period ended September 30, 2001, when assets were down 12 percent.

“No one should be surprised by these numbers,” consultant Eileen Neill, managing director at Wilshire Associates Inc., Santa Monica, California, said of the results for the year ended September 30.

By September 30, many pension executives were experiencing “total fear and were besieged by indecision as markets changed drastically,” said Karin Franceries, vice president in the Strategic Investment Advisory Group of JPMorgan Asset Management, New York.

That fear is hardly surprising, given that more than 30 of the 200 largest U.S. pension plans experienced asset declines of 20 percent or more in the survey period.

Among the institutions that lost the most in combined defined-benefit and defined-contribution plan assets were the Ohio Public Employees Retirement System, with a decline of 31 percent to $58.1 billion; Verizon Communications Inc., which dropped 30.7 percent to $51.8 billion; Northwest Airlines Inc., which fell 25.9 percent to $8 billion; Supervalu Inc., which was down 25.2 percent to $6.6 billion; and Wachovia Corp., which lost 23.9 percent to end the period with $13.2 billion.

Another factor in the decline of U.S. pension plan assets is the acceleration of the much-heralded “death of the corporate defined-benefit plan,” said Kevin P. Quirk, founding partner and principal of industry researcher Casey Quirk & Associates, Darien, Connecticut.

“The corporate defined-benefit plan wind-down will be long and slow, but that decline really started to kick in in the last couple of years as the beginning of the baby-boomer generation began to retire. If you looked at this data in 2001 or 2003, the decline wasn’t a fait accompli. Today, it’s definitely on its way,” Quirk said.

In fact, the number of corporate defined-benefit plans among the top 200 still open to new employees declined to 70 percent as of September 30, from 96 percent as of September 30, 2004.

An analysis of 10 years’ worth of P&I data showed that corporate defined-benefit plan assets accounted for 26.5 percent of the total defined-benefit plan assets of the top 200 funds as of September 30, a decline of 2.6 percentage points from September 30, 1999.

“In this kind of wind-down cycle, you can expect assets to be stable to declining over a long time period. I think you’re seeing the decline begin to show up in earnest in this data,” Quirk said.

Quirk also pointed to an imbalance in employer contributions and benefits paid by the top 200 defined-benefit plans as another potential factor in the big decline in pension assets as of September 30. Employer contributions were up 11.8 percent to $75.1 billion in the year ended September 30, while benefits paid out were up 19.6 percent to $187.3 billion. By contrast, the prior year’s data showed that employer contributions were up 3.9 percent to $67 billion, while benefits paid dropped 3.9 percent to $157 billion.


Filed by Christine Williamson of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail

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