The average funded status for the largest U.S. defined benefit pension plans was 93.8 per cent in 2021, up from 86.2 per cent in 2020 and reaching the highest level in 15 years, according to a new report by Russell Investments Group.

The report, which analyzed 19 publicly listed U.S. corporations with more than US$20 billion in pension liabilities, also found funding deficits among these plans decreased, from $150.3 billion at year’s end 2020 to $65 billion at year’s end 2021.

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In addition, the average increase in funded ratios was 7.2 per cent, with all plan sponsors seeing an improvement of at least four per cent. The three companies with the largest funded ratio gains were Dow Chemical Co. (up 10.6 per cent), Johnson & Johnson Services Inc. (up 12.6 per cent) and United Parcel Service of America Inc. (up 10.9 per cent), all of which have adopted relatively aggressive asset allocations with 65 per cent or more in equities and alternative assets, according to the report.

Employer contributions dropped by 60 per cent, from $19.8 billion in 2020 to $8 billion in 2021, due to factors such as federally-legislated pension funding relief and economic uncertainty leading to reduced spending. Liabilities also fell in the last year with lower discount rates, dipping below the $1 trillion threshold to $967 billion.

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