Pension plans with the highest equity exposure were the biggest benefactors in 2013, according to a study released this week by global consulting and actuarial firm Milliman.
The 2014 Pension Funding Study, which analyzes the 100 largest U.S. corporate pension plans, showed that in 2013 these plans experienced historic improvement, with plan liabilities decreasing by 7.5 percent and assets improving by an average of 9.9 percent.
This resulted in a $198.3 billion improvement in the funded status deficit from the end of 2012, with those with higher equity allocations performing the best.
"Last year was a great year for pension funded status and helped reduce much of the underfunding that has persisted since the global financial crisis," John Ehrhardt, consulting actuary and co-author of the study, said.
"Plans that held off on de-risking their plans were the biggest benefactors of the strong equity performance. With eighteen of the 100 plans in our study now fully funded, and more hopefully reaching full funding this year, the timing for de-risking activities that can lock in funded status may be optimal."
The study results also showed that investment performance exceeded expectations. While the actual weighted return on assets was 9.9 percent, the expected return had been 7.4 percent.
Market capitalization of the plans was up more than 20 percent. The strong equity market performance in 2013 increased the total market cap for the 100 companies by 21.2 percent.
As for 2014, given the compound effect of favorable investment returns in 2013 and higher discount rates at year-end, Milliman estimates that pension expense will decrease to $19 billion, a $13 billion decrease compared with 2013.
It also expects to see more than 30 of the Milliman 100 companies will have pension income in 2014, a level not seen since 2002
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