Top pension plans’ funding improves

The finances of some of the nation’s top pension plans improved in March, the first such gains since July, according to a study released Thursday.

In its monthly survey of the nation’s 100 largest pension plans, global consulting and actuarial firm Milliman found that funding improved by $48 billion. Nonetheless, these plans, which up until last summer had a surplus of funds, were still below the 100% funding level they will eventually be required to meet by law.

Another study released this week also found an improvement in the funding status of the nation’s largest retirement programs. Pension plans at Standard & Poor’s 1500 companies had a $158-billion improvement in funding in March, according to Mercer, a benefits consulting company. Despite that gain, the plans had a $215-billion deficit at the end of March. Pensions were 83% funded.

Up until mid-2008, the largest pension plans were overfunded. But dramatic stock market declines left pension funding in the mid-70% neighborhood for much of this year.

Pensions, also known as defined benefit plans, are heavily invested in the stock market. If the market falls, causing a drop in funding, companies have to pump more money into the retirement plans. Companies have called it yet another burden they must face in this economic downturn.

“It’s the first positive sign that plans have seen since the real impact of the credit crunch hit pension plans at the end of last year,” said Adrian Hartshorn, a member of Mercer’s Financial Strategy Group, which helps companies manage financial risk in their retirement plans.

Pension experts called it a positive development but said they were unsure of its sustainability. The reversal of fortune was caused by a stock market rebound that increased assets and a jump in discount rates that decreased liabilities.

“While this is encouraging, we’re still not out of the woods,” said John Ehrhardt, coauthor of the Milliman 100 Pension Funding Index.

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Trejos writes for the Washington Post.