The aggregate funded status of the largest U.S. corporate defined benefit pension plans ended 2022 at 95 per cent, unchanged from the beginning of the year, according to a new report by WTW.
The report, which analyzed data from more than 350 Fortune 1000 companies that sponsor DB pension plans, found pension obligations declined 26 per cent in the year, from US$1.73 trillion at the end of 2021 to an estimated $1.28 trillion at the end of 2022.
It also found pension plan assets declined 26 per cent in 2022, finishing the year at $1.2 trillion. Overall investment returns were estimated to have averaged negative 19 per cent. Domestic large capitalization equities, as well as domestic small- and mid-capitalization equities, all fell by 18 per cent. Aggregate bonds fell 13 per cent, while long government and long corporate bonds decreased by 29 per cent and 25 per cent, respectively.
“We believe plan sponsors should stay vigilant in 2023 as volatility and downside risk remain,” said Joanie Roberts, senior director of retirement at WTW, in a press release. “The decline in asset values during 2022 may have increased the risk of future pension contributions for many plan sponsors. With some economists forecasting a potential recession in 2023, sponsors will want to revisit how their strategy for managing pension risk needs to evolve.”