A new analysis by Willis Towers Watson (WTW) finds that the funded status of corporate defined benefit (DB) pension plans only increased slightly last year, despite U.S. equity market gains and growing long-term interest rates.
In examining pension plan data of 361 Fortune 1000 companies that sponsor DB pension plans, WTW found that the pension funded status of these plans is estimated to be at 100%–just two percentage points higher than 98% in 2023 but hitting 100% for the first time since 2007.
According to WTW, pension obligations fell 8%, from $1.25 trillion at the end of 2023 to an estimated $1.12 trillion in 2024 because of higher interest rates and pension risk transfer activity.
“Strong gains in the stock market and rising interest rates would traditionally have helped to strengthen the overall financial health of corporate pension plans,” said Joseph Gamzon, managing director of Retirement at WTW. “However, pension plan assets are less concentrated on equity investments today, as they hold more bonds to support liability-hedging strategies to provide funded status stability. As a result, many plan sponsors were able to achieve their goals of funded status stability while also seeing moderate increases in pension plan funding during 2024.”
Further, overall investment returns are estimated to have averaged 3% in 2024, domestic large capitalization equities increased by 25%, and domestic small/mid-capitalization equities grew by 12%. Long corporate and long government bonds realized losses of -2% and -6%.
WTW observes that while investment returns were moderately positive in 2024, “the decline in assets year over year resulted from another active year in pension risk transfers and cash contributions that were lower than in historical years.”
“As we move into 2025, sponsors whose plans aren’t fully funded will want to keep an eye out for opportunities to manage costs and cash contributions, including investment strategy and de-risking initiatives,” added Fred Lamm, managing director of Retirement at WTW. For those with well-funded plans, sponsors will want to think about how best to protect this asset and best utilize the surplus for employee benefits in the coming year.”
WTW’s analysis looks at 361 Fortune 1000 companies with December fiscal year-end dates. The firm notes that a complete examination of actual year-end 2024 results will be available within the coming months.
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Corporate Pension Plans Break Funded Status Streak
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
