Mercer Analysis Pension Plans Improve Funded Status

U.S. pension plans’ funded status improved to 85 percent with a deficit of $225 billion at the end of 2009, compared with a funded status of 75 percent and a deficit of $409 billion at the end of 2008, according to a Mercer analysis released Monday, January 4.

Adrian Hartshorn, a New York-based member of Mercer’s Financial Strategy Group, said in a statement that the improved funding statement status will help pension fund earnings and reduce the need for future cash contributions.

“However, in 2010, some companies may see increased cash contribution requirements or higher [Financial Accounting Standards Board] pension expenses because of smoothing methods, which deferred 2008 losses,” Hartshorn said.

Hartshorn said one reason for the improvement in funding in 2009 is higher corporate bond yields, which has reduced pension plans’ liabilities. A second is the rise in stock market values over the past 12 months.

The Mercer analysis says most plan sponsors continue to have assets invested predominantly in return-seeking assets, mainly equities. As a result, pension plans’ funded status is likely to remain volatile, Mercer said.

Filed by Judy Greenwald of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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