For Big Companies, Pension Funding Is Shrinking—Fast

In a matter of just months, the largest of the large corporate pension plans have seen the vast majority of their 2007 gains wiped out, according to a new study from actuarial consulting firm Milliman.

The 100 largest corporate plan sponsors—ranging from General Motors, with its $117 billion pension, to Ingersoll-Rand’s $2.5 billion plan—collectively improved their funded status by $85 billion last year, going from a roughly $15 billion deficit at the end of 2006 to a $70 billion surplus at the end of 2007.

However, Milliman estimates that these pension plans experienced a $62 billion decrease in their funded status in the first quarter of this year, erasing almost three-quarters of their gains for 2007. Declines in the equity markets, coupled with lower interest rates in January, prompted the reversal, according to Milliman, which also estimates that the collective funded status of the 100 largest pension plans now teeters at slightly below 100 percent.

To put this in context, these corporations—which have a combined $1.3 trillion in total assets—experienced the most significant drop in funded status for a single quarter in more than two years, noted John Ehrhardt, principal and consulting actuary at Milliman. He added that since the end of the third quarter of last year, the 100 largest pension plans have lost almost $100 billion of their surplus assets.

Copies of the Milliman 2008 Pension Study are available at www.milliman.com

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.