Fortune 1000 Pension Funds Suffer in 2014

The pension funds of America’s largest employers took a step backward in 2014, according to a new survey.

An analysis by Towers Watson found the aggregate pension funded status among Fortune 1000 companies was just 80% in 2014, down from 89% in 2013. Put another way, the total pension deficit for those companies hit $343 billion, twice the deficit that existed at the end of 2013.

Alan Glickstein, a senior retirement consultant at Towers Watson, said much of the deficit increase is due to a change in longevity expectations.

“A one-time strengthening of mortality assumptions is responsible for about 40% of the increased deficit,” he said, in a press release. “We also found that plan sponsors that used liability-driven investing strategies in 2014 had better results, as the declining discount rates were matched with very strong returns for long corporate and treasury bonds.”

Total pension plan assets actually increased in 2014, up 3% to $1.4 trillion, on the strength of an estimated 9% investment return, according to the study. That high return offset a decrease in the amount companies contributed to their plans. Contributions were about $30 billion in 2014, 29% lower than the previous year.

"Given the change in funded status, we expect many plan sponsors will need to reevaluate their retirement plan strategies in 2015,” said Dave Suchsland, another senior retirement consultant at Towers Watson. “Last year’s results surrendered most of the funded status gains earned in 2013. This year will most likely bring higher expenses charges and unless there is an uptick in interest rates or equity market performance, eventually additional contribution requirements.”