By Michael Hall 

In the wake of last year’s market turbulence, are most corporate pension plans still on a pathway to achieving full funding?

Yes, according to our latest research. Our 2023 Prudent Pension Funding Report reveals most (97%) corporate pension plans can achieve full funding without a significant draw on corporate cash, based on the respective firms’ latest disclosures as well as market and interest rate movement so far in 2023. This finding increased from 86% in last year’s report.

Despite a challenging economic environment in 2023, pension plans continue on a positive trend for full funding. Whether it’s through a small increase in contributions or a small increase in returns, the report shows that full funding truly is attainable for most corporations in just a few years’ time.

Using historic data from our firm’s Enterprise Risk Report, we studied approximately 500 pension plans for companies in the U.S. large-cap Russell 1000® Index with pension disclosures to determine the cash flow percentage needed from operations for the pensions to become fully funded within 10 years.

This year’s report also revealed that 62% of companies’ pension plans would be fully funded in less than 10 years with a contribution rate of only 1% of corporate cash flow (holding all other factors constant), while an additional 35% of companies’ pension plans could be fully funded in less than 10 years at a 3-5% contribution rate. Only 10 pension plans of the 500 reviewed would need to contribute 20% or more of their cash flow from operations to achieve full funding in 10 years. This small minority of plans have historically driven the narrative, creating the continued false perception that the majority of corporate pension plans are in crisis.

The Prudent Pension Funding Report looks at the past decade for perspective. In 2012, at a 5% contribution rate, 78% of plans required more than 10 years to achieve full funding. In the 2023 report, that number dropped to just 2%.

Get the report “here“