The funded status of the Russell 3000 pension plans increased by more than 17 percent in the past year to 94 percent, according to J.P. Morgan Asset Management.
The company estimates that the funded status of these plans will increase to 96 percent by the end of December 2013, driven by strong growth asset returns and a decrease in the discounted value of liabilities.
According to J.P. Morgan, in the past year, one plan in five went from underfunded to overfunded. In 2007, before the economic crisis hit, one-quarter of U.S. pension funds were overfunded, but J.P. Morgan believes that these plans are even healthier now than they were back then.
Strong contributions and investment returns over the past six years have driven assets up 31 percent to $467 billion and they have become more cognizant of risk, putting an additional 5 percent into fixed income.
Plan sponsors also have less leveraged balance sheets, and with a positive outlook on discount rates, their funded status will likely increase, the company found.
Pension plan deficits have fallen by two-thirds from the end of 2012, a decrease of $454 billion.
The cost of pension plans should improve starting in 2014, the company predicts. It also believes contributions will level off, if not decrease, for 2013, despite contributions from plan sponsors committed to derisking.