WILSHIRE ASSOCIATES REPORT SHOWS
SIGNIFICANT IMPROVEMENT OF THE FINANCIAL HEALTH
OF CORPORATE PENSION PLANS IN 2006
SANTA MONICA, CA, April 2, 2007 -– The financial health of corporate pension plans
experienced a substantial improvement in 2006 with the funding ratio (assets divided by
liabilities) for all plans combined increasing from 93% to 101% and a $83.5 billion
deficit at the beginning of the year changed to a $16.6 billion surplus, according to a
report issued today by Wilshire Consulting, the pension advisory business unit of
Wilshire Associates, a leading global investment consulting, investment technology and
investment management firm.
The report shows that defined benefit pension assets for S&P 500 companies grew $132.5
billion, from $1,112.2 billion to $1,244.6 billion, while liabilities increased $32.3 billion,
from $1,195.7 billion to $1,228.0 billion. While 71% of corporate pension plans are
underfunded, that figure is notably lower than the 83% reported in 2005. The median
(50th percentile) corporate funded ratio is 91%, which is an improvement from last year's
85%.
"A fourth consecutive year of positive equity returns contributed to the increase in
pension assets, noted Julia Bonafede, a senior managing director of Wilshire Associates
and the head of Wilshire Consulting. "The median 2006 investment return was 11.5%,
up from 8.5% in 2005 and 10.8% two years ago. Additionally, S&P 500 companies
contributed $36.3 billion into their defined benefit plans in 2006, however that was less
than the $46.3 billion contributed in 2005."
Steven J. Foresti, managing director, Wilshire Associates and head of the Investment
Research Group of Wilshire Consulting, commented that, "Although the interest rates
used to discount future benefits rose moderately, lowering the present value of liabilities,
the overall change in liabilities was an increase. The median discount rate used to value
pension liabilities rose from 5.62% to 5.75%, while total liabilities increased 2.7% for the
year." Combined pension expense for S&P 500 companies was $35.3 billion for 2006, up
from $30.5 billion a year ago. Regular annual pension expense accruals from employee
service and interest expense on existing liabilities totaled $96.0 billion in 2006, slightly
higher than the $91.3 billion a year ago.
The distribution of pension liabilities and assets of S&P 500 companies is relatively
concentrated among the largest plans. More than half of the total pension liabilities and
assets were held by the 24 and 21 largest plans when ranked by liability and asset size,
respectively. Conversely, the smallest 100 plans when ranked by liability and asset size
made up 1.8% and 2.1% of the total liability and asset pool, respectively.
About Wilshire Associates
Wilshire Associates is a leading global investment technology, investment consulting and
investment management firm with four business units, including: Wilshire Analytics,
Wilshire Funds Management, Wilshire Consulting and Wilshire Private Markets.
Wilshire Consulting provides investment consulting services including asset allocation,
investment structure, manager search and performance measurement to some of the
nation's largest public and corporate retirement plans, endowments, foundations, and
major insurance companies. Wilshire currently consults to more than 100 clients with
total assets in excess of $650 billion.
The firm was founded in 1972, revolutionizing the industry by pioneering the application
of investment analytics and research to investment management for the institutional
marketplace. Wilshire also is credited with helping to develop the field of quantitative
investment analysis that uses mathematical tools to analyze market risks. All other
business units evolved from Wilshire's strong analytics foundation. Wilshire developed
the index now known as the Dow Jones Wilshire 5000 Composite Indexsm, the first
asset/liability models for pension funds, the first U.S. equity style metrics and many other
"firsts" as the firm grew to nearly 350 employees serving the investment needs of its
clients around the world.
Based in Santa Monica, CA, Wilshire provides services to clients in more than 20
countries representing in excess of 600 organizations with assets totaling more than $12.5
trillion. With nine offices on four continents, Wilshire Associates and its affiliates are
dedicated to providing clients with the highest quality counsel, products and services.
Please visit www.wilshire.com for more information.
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