The past year may not have been known for health—unless you’re talking about the funded status of private-sector pension plans. That, at least, was very healthy, according to a recent report.
In fact, says Willis Towers Watson, the aggregate funded status for the 361 pension plans it examined among the Fortune 1000 companies that sponsor pension plans was 96% at the end of 2021—the best since before the Great Recession. Willis Towers Watson attributes the 2021 results to strong investment returns and rising interest rates.
An additional sign of health, Willis Towers Watson reports, is that the funding deficit of those 361 plans stood at $63 billion—a sharp, $169 billion improvement in just a year. Pension obligations also fell by $150 billion, to $1.74 trillion.
In a further indication of growing vigor for corporate pension plans, Willis Towers Watson says that pension plan assets also grew slightly—by 1%, to $1.67 trillion. The growth in assets was held to that level, says the report, was due to what Willis Towers Watson called a “record year” in pension risk transfers, as well as lower cash contributions than usually are made in a year.
And, says the report, in 2021 overall investment returns for those 361 plans averaged 8.9%; however, returns varied “significantly” depending on asset class.
Willis Towers Watson’s findings are similar to those of October Three, which found that plan funding for the two hypothetical DB plans it tracks—one that is invested in a more traditional way and another invested in a conservative manner—improved overall in 2021. In addition, Fully Vested reports that in December, the funded status of the plans it tracks improved to 95.6%, assets grew by 1.2% and liabilities fell by 1%.
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