Pension Plan Funding Plummets

By Staff Writer

January 08, 2009 at 10:50 AM

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A typical large defined benefit pension plan may have ended 2008 with only 66% of the assets needed to cover pension obligations.

The "funded ratio" of the benchmark plan that Towers Perrin Inc., Stamford, Conn., uses to assess the effects of moves in the investment markets has fallen to the lowest level since the firm began the funded ratio data series in 1990, firm actuaries report.

The funded ratio dropped 6.9 percentage points in December 2008, and about 20 percentage points in the fourth quarter of 2008, the actuaries estimate.

The benchmark plan funded ratio started the year at about 93%, according to Towers Perrin actuarial calculations.

Towers Perrin actuaries gauge pension plan health by estimating the performance of a hypothetical benchmark pension plan that investors 60% of its holdings in stocks and 40% in bonds and other fixed-income instruments.

The benchmark portfolio would have produced a 2.9% return in December but fallen by about 23% for all of 2008, Towers Perrin actuaries report.

Projected benefit obligations increased about 14% in December, Towers Perrin actuaries estimate.

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