Corporate pension plans took a hit last year, dropping 9 percentage points. Analysts point to two key factors as cause for the decline: falling interest rates and new, lower, mortality rates.

A new analysis from Towers Watson estimates the corporate pension deficit currently stands at $343 billion, close to double last year’s $162 billion deficit.

“Despite a rising stock market in 2014, funding levels for employer-sponsored pension plans dropped back to what we experienced just after the financial crisis,” says Alan Glickstein, a senior retirement consultant at Towers Watson. He points to a one-time strengthening of mortality assumptions from the Society of Actuaries for roughly 40% of the increased deficit.

“For most plan sponsors, the discussion around the SOA’s new study on the mortality of pension plan participants was the most significant pension event of the year,” adds Dave Suchsland, another Towers Watson senior consultant. “The study drew the attention of plan sponsors and auditors, resulting in many plan sponsors updating that key assumption.”

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The SOA in October provided testimony on mortality tables to the Select Revenue Measures subcommittee of the House Ways and Means Committee during discussions of pension plans for the private sector. The revised benchmark added more than two years to the typical U.S. man and woman’s life expectancy, the first tweak to mortality estimates since 2000.

A common link might be seen between longer lifespans and working longer, Glickstein added.

“If we believe longevity has improved and will continue to, it is also reasonable to consider changing retirement assumptions to reflect a longer time in the workforce,” he said. “If people stay longer with the same employer, the effect of later retirement will generally be a decrease in liability.”

The Towers Watson analysis also found investment returns varied significantly by asset class, with large-cap U.S. equities up roughly 14% and international equities down nearly 5%.

The analysis estimates that companies contributed $30 billion to their pension plans in 2014 — 29% less than in 2013 — with contributions declining due in part to recent funding relief.

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“We also found that plan sponsors that used liability-driven investing strategies in 2014 had better results, as the declining discount rates were matched with very strong returns for long corporate and Treasury bonds,” Glickstein says.

The analysis examined 411 of the Fortune 1000 companies with fiscal years that ended Dec. 31, 2014 and that sponsor U.S. tax-qualified defined benefit pension plans.

“We experienced another big year of pension de-risking in 2014, with significant lump-sum buyout and annuity purchase activity. Given the change in funded status, we expect many plan sponsors will need to reevaluate their retirement plan strategies in 2015,” Suchsland added. “Last year’s results surrendered most of the funded status gains earned in 2013. This year will most likely bring higher expense charges and, unless there is an uptick in interest rates or equity market performance, eventually additional contribution requirements.”

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