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Funding Pension Plans in 2018

2017 improvements to pension plans’ funded status, as well as early-2018 volatility, has implications for companies’ pension funding strategy this year.

By Gordon A. Young | Updated on March 22, 2018

As the calendar turned from 2017 to 2018, we observed a strong equity market rally, the most significant overhaul of the corporate tax system in a generation, and a strong economy with simultaneously low unemployment and low inflation. We also observed rising interest rates coupled with a new Federal Reserve chairman appointed by President Trump. And, early in the year, we experienced significant capital market volatility.

Many pension plans in the United States have emerged from this economic environment with improved funded status. In fact, the aggregate funded status of pensions at the nation’s largest companies is currently at its highest level since 2013. (See Figure 1, below.)

In our annual study, Willis Towers Watson analyzed the 10-Ks of 389 Fortune 1000 companies that sponsor U.S. defined-benefit pension plans with fiscal years ending in December. The aggregate funded status on an accounting basis improved from 81 percent at the beginning of 2017 to 83 percent at the end of the year. That’s because although pension liabilities climbed last year, assets climbed higher.

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