In a matter of just months, the largest of the large corporate pension plans
have seen the vast majority of their 2007 gains wiped out, according to a new
study from actuarial consulting firm Milliman.
The 100 largest corporate plan sponsors—ranging from General Motors, with its
$117 billion pension, to Ingersoll-Rand’s $2.5 billion plan—collectively
improved their funded status by $85 billion last year, going from a roughly $15
billion deficit at the end of 2006 to a $70 billion surplus at the end of
2007.
However, Milliman estimates that these pension plans experienced a $62
billion decrease in their funded status in the first quarter of this year,
erasing almost three-quarters of their gains for 2007. Declines in the equity
markets, coupled with lower interest rates in January, prompted the reversal,
according to Milliman, which also estimates that the collective funded status of
the 100 largest pension plans now teeters at slightly below 100 percent.
To put this in context, these corporations—which have a combined $1.3
trillion in total assets—experienced the most significant drop in funded status
for a single quarter in more than two years, noted John Ehrhardt, principal and
consulting actuary at Milliman. He added that since the end of the third quarter
of last year, the 100 largest pension plans have lost almost $100 billion of
their surplus assets.
Copies of the Milliman 2008 Pension Study are available at www.milliman.com
Filed by Mark Bruno of Financial Week, a sister publication of Workforce
Management. To comment, e-mail editors@workforce.com.
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