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Mercer predicts pension funding drop

Most pension plans will see their funded status drop significantly in 2011, with plan sponsors facing sharply higher contributions, according to an analysis by Mercer actuaries.

By Paula Aven Gladych | Updated on October 28, 2011

Most pension plans will see their funded status drop significantly in 2011, with plan sponsors facing sharply higher contributions, according to an analysis by Mercer actuaries. Among the private-sector plans it studied, Mercer found that two-thirds will see at least a 50 percent jump in required contributions from last year, and at least one-quarter likely will see contributions more than double.

“Historically, low interest rates, driven in large part by U.S. economic policy, together with prior equity declines, will hit plan sponsors with a vengeance in 2011, but the full effects of this one-two punch won’t be fully felt until 2012 and beyond,” Mercer says. “These huge and continuing cash calls, the slow economic recovery and big potential increases in Pension Benefit Guaranty Corp. premiums under consideration in Congress could place many plan sponsors in a difficult position.”

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