The past year was not a good one for the top 100 corporate pensions, according to research by Towers Watson.

Falling interest rates and increased liabilities from updated mortality assumptions combined in 2014 to eradicate most of the gains from the previous year, Towers Watson found.

The average funded status of the Towers Watson Pension 100 fell from 89% to 81% in 2014, even though plan assets gained in value. One bright note was that plan sponsors who use liability-driven investment strategies had good results in 2014, the company said.

Towers Watson examined pension disclosures from the Securities and Exchange Commission 10-K filings of 100 publicly traded U.S. sponsors of large pension plans for its data. It looked at the reported funding results, the discount rates used to measure liabilities, the effect of new mortality assumptions on the projected benefit obligation, target asset allocation policy for 2015, return on investment and sponsors’ 2014 contributions.

It found that the gap between liabilities and assets went from an $82 billion surplus in 2007 to a $297 billion shortfall at the end of 2012. Assets grew and interest rates rose for the first time in four years in 2013, reducing plan obligations, Towers Watson said. By the end of 2013, the funding shortfall dropped to $128 billion. It jumped back to $248 billion for the TW Pension 100 by year-end 2014.

Assets in these top 100 plans grew by 3% over 2014, while plan obligations rose by 13%. Investment returns were higher than expected and sponsors made relatively large plan contributions, Towers Watson said.

It wasn’t enough to combat the increased liabilities. The pension deficit increased from $127.9 billion in 2013 to $248.2 billion in 2014, an increase of 94%, according to Towers Watson research.

The average funded status for the TW Pension 100 was 82.2% at the end of the year, down from 90.2% in 2013. It is still better than 2012.

Of the 100 pensions that were examined, only 56 were funded at 80% or higher. Forty-four fell below 80%.

Plan sponsors continued to move their plans from public equities to fixed income and alternative investments. Investment returns were positive, especially for fixed income holdings, Towers Watson found.

Employers contributed the lowest amount since 2008, according to the data. For 2014, plan sponsors contributed $26.5 billion, down from $27.8 billion in 2013 and $44.7 billion in 2012.

Many plan sponsors decided that 2014 was the year to de-risk their large pension obligations. Some offered lump sum buyouts or purchased annuities for plan participants.

“Lower funding levels are a concern for plan sponsors. Weaker funding positions will likely necessitate larger cash contributions in the near future and higher pension costs will most likely drive up the charge against profits for 2015, unless equity returns are strong and/or interest rates rise,” Towers Watson concluded. 

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