{"id":22068,"date":"2023-09-25T17:48:42","date_gmt":"2023-09-25T17:48:42","guid":{"rendered":"https:\/\/microloannexus.com\/news\/corporate-pensions-are-at-their-healthiest-in-more-than-a-decade\/"},"modified":"2023-09-25T17:48:44","modified_gmt":"2023-09-25T17:48:44","slug":"corporate-pensions-are-at-their-healthiest-in-more-than-a-decade","status":"publish","type":"post","link":"https:\/\/microloannexus.com\/?p=22068","title":{"rendered":"Corporate pensions are at their healthiest in more than a decade"},"content":{"rendered":"<div id=\"RegularArticle-ArticleBody-6\" data-module=\"ArticleBody\" data-test=\"articleBody-2\" data-analytics=\"RegularArticle-articleBody-6-2\"><span class=\"HighlightShare-hidden\" style=\"top:0;left:0\"><\/span><\/p>\n<div class=\"group\">\n<p>Pension plans for the largest U.S. companies are at their healthiest in more than a decade \u2014 and that&#8217;s largely good news for the workers who participate in such plans, said retirement experts.<\/p>\n<p>Public companies in the <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-1\">S&amp;P 500<span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\" aria-label=\"Add To Watchlist\" data-testid=\"dropdown-btn\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"><\/span><\/button><\/span><\/span><\/span> stock index had an average pension &#8220;funded ratio&#8221; of 102% as of Sept. 21, according to data tracked by financial services firm Aon. That&#8217;s the highest level since at least the end of 2011, when the ratio was around 78%.<\/p>\n<p>A funded ratio is one way to gauge pension health. It measures a company&#8217;s pension assets versus its liabilities. In other words, it assesses the money a pension has on hand versus the funds a company needs in order to pay future pension income to workers.<\/p>\n<p><strong>More from Personal Finance:<\/strong><br \/>Social Security&#8217;s trust funds are running dry. 4 things to know<br \/>This account is like an &#8216;extra strength&#8217; Roth IRA<br \/>&#8216;Financial vortex&#8217; may reduce retirement savings by up to 37%<\/p>\n<p>A funded level of 100% or more means it currently has the assets on hand to meet it future obligations.<\/p>\n<p>&#8220;This is a really good thing,&#8221; Byron Beebe, global chief commercial officer for Aon, said of the current funding level. &#8220;It&#8217;s at the highest it&#8217;s been in a really long time.&#8221;<\/p>\n<p>Of course, pension funding is merely a &#8220;financial snapshot &#8230; at a single moment,&#8221; according to the American Academy of Actuaries. It can change based on factors like the health of the U.S. economy. Each plan is unique, meaning funded status alone isn&#8217;t the only gauge for pension health, it said.<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\">Why pension funding is important for workers<\/h2>\n<div class=\"group\">\n<p>Pensions in the private sector have become rarer over the decades as companies have replaced them with 401(k)-type plans.<\/p>\n<p>Pension plans are also known as &#8220;defined benefit&#8221; plans, since worker&#8217;s future benefit is defined according to a formula based on factors like tenure and salary.<\/p>\n<p>At their peak, in 1983, there were 175,000 defined-benefit plans in the private sector, according to U.S. Department of Labor data. By 2020, that number had declined to about 46,000.<\/p>\n<\/div>\n<div role=\"region\" aria-labelledby=\"Placeholder-ArticleBody-Video-107255998\">\n<div role=\"button\" tabindex=\"0\" id=\"Placeholder-ArticleBody-Video-107255998\" class=\"PlaceHolder-wrapper\" data-vilynx-id=\"7000303453\" data-test=\"VideoPlaceHolder\">\n<div class=\"InlineVideo-videoEmbed\" id=\"InlineVideo-0\" data-test=\"InlineVideo\">\n<div class=\"InlineVideo-wrapper\">\n<div class=\"InlineVideo-inlineThumbnailContainer\"><span class=\"InlineVideo-videoButton\"><\/span><span><\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"group\">\n<p>Many of those plans are &#8220;frozen&#8221; and no longer allow workers to accrue benefits, however.<\/p>\n<p>As a result, there are fewer &#8220;active&#8221; participants, who continue to earn pension credits. In 1975, there were 27.2 million active participants; by 2019, the number had fallen by more than half, to 12.6 million, according to the Congressional Research Service.<\/p>\n<p>In total, there are about 32 million participants in corporate pensions, including both active participants and those no longer accruing benefits, according to the Labor Department.<\/p>\n<p>Having a healthy pension plan makes it more likely companies with active plans will hold onto them and won&#8217;t terminate or freeze them, Beebe said.<\/p>\n<\/div>\n<blockquote data-test=\"Pullquote\">\n<div class=\"Pullquote-pullquote\" style=\"border-top-color:#002f6c\">\n<div>\n<p>This is a really good thing. It&#8217;s at the highest it&#8217;s been in a really long time.<\/p>\n<div class=\"Pullquote-sourceWrapper\">\n<p>Byron Beebe<\/p>\n<p>global chief commercial officer for Aon<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n<div class=\"group\">\n<p>In extreme cases, underfunding can also lead to a benefit cut, experts said.<\/p>\n<p>Companies with failed pensions may transfer their obligations to the federal Pension Benefit Guaranty Corp., which serves as a financial backstop that guarantees pension benefits.<\/p>\n<p>However, beneficiaries aren&#8217;t assured to get their fully promised payout. That&#8217;s because PBGC insures benefits up to a limit, based on age. Most pensioners aren&#8217;t affected by this limit, PBGC said; but those who are would get a benefit reduction. \u00a0<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\">Why plan funding has improved<\/h2>\n<div class=\"group\">\n<p>Corporate pension funding languished after the 2008 financial crisis.<\/p>\n<p>The recent improvement is largely attributable to three factors: a rise in interest rates, strong stock performance and policy changes to how some companies fund their plans, said John Lowell, partner at October Three, a pension consulting firm. \u00a0<\/p>\n<p>Due to how pension liabilities are calculated, having a higher interest rate on bonds generally means companies don&#8217;t have to contribute as much money to their pensions today to satisfy future benefits, Lowell said.<\/p>\n<p>The insurance premiums companies pay to the PBGC also generally rise according to a plan&#8217;s level of underfunding \u2014 and those premiums have increased significantly, Lowell said. As a result, companies are more proactive about making contributions to their plans to ensure they&#8217;re fully funded, Lowell said. \u00a0\u00a0\u00a0<\/p>\n<p>And aside from a few periods like 2022, asset classes like stocks &#8220;have been performing well for a solid 10 years or more,&#8221; boosting plan assets, Lowell said. (The S&amp;P 500 lost more than 19% in 2022, its worst showing since 2008.)<\/p>\n<p>Companies have also adopted investment strategies that fluctuate less with the whims of the investment markets, said Beebe at Aon. In a simple sense, with a portion of the portfolio they buy bonds whose income matches that of future pension promises, offering more predictability, he said.<\/p>\n<\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.cnbc.com\/2023\/09\/25\/corporate-pensions-are-at-their-healthiest-in-more-than-a-decade.html\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Pension plans for the largest U.S. companies are at their healthiest in more than a decade \u2014 and that&#8217;s largely good news for the workers who participate in such plans, said retirement experts. Public companies in the S&amp;P 500 stock index had an average pension &#8220;funded ratio&#8221; of 102% as of Sept. 21, according to<\/p>\n","protected":false},"author":1,"featured_media":22069,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[43],"tags":[],"class_list":{"0":"post-22068","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.12 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Corporate pensions are at their healthiest in more than a decade | Micro Loan Nexus<\/title>\n<meta name=\"description\" content=\"Pension plans for the largest U.S. companies are at their healthiest in more than a decade \u2014 and that&#039;s largely good news for the workers who participate\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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