It's a classic good news/bad news announcement: despite an upsurge in employer contributions to their pension plans, the long-running economic malaise continues to undermine those accounts, in the worst way since 2008.
Towers Watson released new figures Tuesday suggesting that the average funded status of Fortune 1000 pension plans dropped as much as four points in 2011, impacted by declining interest rates and weak asset returns.
This despite some $70 billion in employer contributions to those funds in 2011.
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The analysis, conducted among 422 companies with fiscal years ending in December, found that the average funded pension status dropped from 80 percent in 2010 to 76 percent in 2011, the first year since 2008 that those pension plan funding levels declined.
Funding levels had, in fact, improved in both 2009 and 2010, thanks to better stock market returns and significant employer contributions.
"The return to fully funded pension plans got sidetracked somewhat last year," admitted Mike Archer, a senior retirement consultant with Towers Watson, in a release. "Despite the small setback, pension plans are still in better shape than they were right after the financial crisis."
In a positive development, the company's analysis found that pension plan assets did increase by 1 percent last year to $1,201 billion, up from $1,193 billion in 2010. That's still a far cry from 2007, when most plans were fully funded.
"What could be helpful for plan sponsors is much-needed legislative relief that would help manage the impact of volatility in interest rates and encourage employers to fully fund their plans as the fragile economic recovery continues," said Alan Glickstein, another Towers Watson consultant.
The analysis also found that pension deficits were up significantly, reaching $343 billion in 2011, $110 billion higher than the year before. Only 5 percent of plans are thought to be fully funded.
A third of Fortune 1000 companies also showed pension funding levels less than 70 percent at the end of 2011, versus the 21 percent in the same position in 2010.
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