Corporate pension underfunding dropped, and funding levels rose last year, the Standard and Poors 500 has reported. But while the S&P had some good news for 2015, it expresses misgivings about pension plans’ long-term prospects.
The report says that in 2015, corporate underfunding was $369 billion — $20 billion, or 5.3% — less than the level of the year before. In addition, pension funding rose slightly from $81.21% in 2014 to $81.42% in 2015.
The report also says that corporate pensions’ obligations fell by almost $90 million:
2014: $2.070 billion
2015: $1.983 billion
“For now, both pensions and OPEBs remain a manageable cost with sufficient resources (and cash flow) to support them,” says the S&P report.
But the S&P appends an asterisk to the good news, saying that supplementary savings and retirement accounts for individuals pension funds have improved but nonetheless “both pension funds and personal wealth stand at lower levels than their peaks, taking longevity and inflation into account.”
Not only that, it suggests that the good news may not extend to the 2016 results. The S&P says that low interest rates could push discounted liabilities up to record levels, and could result in underfunding hitting new record deficits in 2016. “The significant decline in 2016 interest rates (to date) calculates out to higher liabilities,” the report says.
The report is not optimistic about the longer run, either. “Most corporations have successfully shifted the burden of risk for retirement to the employee, as 401(k)-type savings accounts have become the norm, and active defined-benefit pensions in the private sector have become few and far between,” it says. The S&P says that it considers reductions in pensions likely to continue, as is the shift of responsibility for benefit costs from employer to worker.
The report says that in 2015, corporate underfunding was $369 billion — $20 billion, or 5.3% — less than the level of the year before. In addition, pension funding rose slightly from $81.21% in 2014 to $81.42% in 2015.
The report also says that corporate pensions’ obligations fell by almost $90 million:
2014: $2.070 billion
2015: $1.983 billion
“For now, both pensions and OPEBs remain a manageable cost with sufficient resources (and cash flow) to support them,” says the S&P report.
But the S&P appends an asterisk to the good news, saying that supplementary savings and retirement accounts for individuals pension funds have improved but nonetheless “both pension funds and personal wealth stand at lower levels than their peaks, taking longevity and inflation into account.”
Not only that, it suggests that the good news may not extend to the 2016 results. The S&P says that low interest rates could push discounted liabilities up to record levels, and could result in underfunding hitting new record deficits in 2016. “The significant decline in 2016 interest rates (to date) calculates out to higher liabilities,” the report says.
The report is not optimistic about the longer run, either. “Most corporations have successfully shifted the burden of risk for retirement to the employee, as 401(k)-type savings accounts have become the norm, and active defined-benefit pensions in the private sector have become few and far between,” it says. The S&P says that it considers reductions in pensions likely to continue, as is the shift of responsibility for benefit costs from employer to worker.
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