September 14, 2012
Institutional Group released the results of its corporate pension investment
mid-year quick poll. ---
Because of continued market volatility and record-low
interest rates this year, the average funded status of U.S. corporate pensions
dropped 2.9 percentage points in July, to 68.7%—the lowest since 2007. The goal
of the survey was to determine the investment challenges and strategies that
had the greatest impact on pension management in the U.S. and Canada this year.
Some key findings include:
The future remains uncertain. More than half (55%) of pension plans surveyed are either
closed or frozen, meaning new employees cannot participate, but only 1% of
plans have begun the termination process. An additional 37% said their pension
is 81% to 90% funded; only 11% admitted having a plan that is below 70% funded.
In the U.S., 27% of plans surveyed currently fail to meet the federal funding
minimum of 80%, the poll found.
When asked whether or not they would terminate their plans
if they were fully funded, 44% of respondents said they would terminate the
plan but continue to offer an alternative retirement benefit such as a 401(k),
and 56% said they would not terminate because the pension is too critical a
part of the benefits structure.
U.S. MAP-21 to leave contributions largely unaffected. Less than half (43%) of U.S. respondents believe MAP-21 –
the recent law that changes how liabilities are calculated, potentially
lowering contributions in the immediate future – will be effective, while
almost one-quarter (21%) said it was too early to gauge the impact.
Popularity of alternatives declines in 2012. In previous polls, alternatives in portfolios steadily
increased (78% in 2011). However, this year’s poll saw a slight decline in use
(down to 65%), the same percentage as 2010. This decrease had the greatest
impact on plans with more than $1 billion in assets, which dropped usage by