US - The funding of large pension plans improved in 2003 on the back of stronger investment returns and the nearly US$72bn contributed by employers to their plans during the year, according to consultants Watson Wyatt.
And they estimate that the 622 companies surveyed will contribute another $40bn to their plans during 2004.
The funded status of large company pension plans improved from an average of 82% in 2002 to 88% in 2003.
Kevin Wagner, a consulting actuary at Watson Wyatt said: Employers have demonstrated real commitment to their pension plans, increasing plan contributions while interest rates were low and investment performance was poor.
“If employers had not attempted to compensate for the 'perfect storm' that hit their plans, the average funded status for pension plans would be about 81% today rather than 88%.
During this period, pension plan liabilities increased by nearly $125bn or about 11%, but assets increased by $172.4bn or about 18 %.
The analysis also noted a continuation in the trend toward fewer defined benefit (DB) plans. The number of Fortune 1000 companies that reported sponsoring a DB plan declined from 660 in 2000 to 622 in 2003.
The US pension plan system appears to be working the way it's supposed to, although employers still must contend with volatility in their annual pension contributions, said Wagner.
Additionally, the future of defined benefit programs will remain uncertain until employers receive permanent funding relief and Congress resolves the legal uncertainty that surrounds cash balance plans, he added.
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