The stock market helped, and so did employer contributions that were greater than expected—giving the largest U.S. pension plans a “modest” improvement in funded status at year-end 2017 over where they were at the end of 2016.

That’s according to a Willis Towers Watson analysis, which finds that, among the 389 Fortune 1000 companies that sponsor U.S. defined benefit pension plans and have a December fiscal-year-end date, the aggregate pension funded status is estimated to be 83 percent at the end of 2017, compared with 81 percent at the end of 2016.

The analysis also finds that the pension deficit is projected to have decreased to $292 billion at the end of 2017, compared with a $317 billion deficit at the end of 2016.

“Strong stock market performance throughout the year and robust employer contributions to their pension plans helped to boost funded status to its highest level since 2013 after several stagnant years,” Matthew Siegel, a senior consultant at Willis Towers Watson, says in a statement.

Siegel adds, “Several plan sponsors contributed more to their plans last year than originally expected, most likely in response to rising Pension Benefit Guaranty Corporation premiums and growing interest in derisking strategies, and potentially in anticipation of lower future corporate rates from tax reform. The improved funded position occurred even though pension discount rates finished the year down approximately 50 basis points from the beginning of the year.”

According to the analysis, pension plan assets increased from $1.33 trillion at the end of 2016 to an estimated $1.43 trillion at the end of 2017.

Overall investment returns are estimated to have averaged 13 percent in 2017, although returns varied significantly by asset class.

Domestic large-capitalization equities returned 22 percent; domestic small-/mid-capitalization equities earned a bit less, at 17 percent.

Aggregate bonds provided a 4 percent return, while long corporate and long government bonds, typically used in liability-driven investing strategies, earned 12 percent and 9 percent, respectively.

The analysis estimates that these companies contributed $51 billion to their pension plans in 2017; that’s close to twice the amount needed to cover benefits accruing during the year.

These contributions were higher than the $43 billion employers contributed to their plans in 2016.

Total pension obligations increased from $1.65 trillion to an estimated $1.72 trillion, with the biggest changes being the increase for lower discount rates largely offsetting the decrease for benefits paid.

Instant Insights /

Largest U.S. pension plans saw improvement in 2017

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