In 2013, as rising stock prices increased asset values andrising interest rates lowered liabilities, the funded statusimproved substantially for pension plans from the nation's largestcompanies. After analyzing the financials of the 418 Fortune 1000companies that have a December fiscal year-end and sponsor a U.S.tax-qualified defined-benefit pension plan, Towers Watson estimates that thefunded status of these plans, on average, was 93 percent at the endof last year. That's up 16 percentage points from the 77 percentfunding ratio a year earlier (see Figure 1, below).

As a result, plan sponsors' contributions to their pensions felllast year. Towers Watson estimates that the companies in itsanalysis contributed $48.8 billion to their plans in 2013, which is23 percent less than in 2012.

“The strong stock market and higher interest rates last yeargave plan sponsors the one-two punch they needed to cut the fundingdeficit of their corporate pension plans by nearly 75 percent,”says Alan Glickstein, a senior retirement consultant with TowersWatson. “Funding ratios are now at their highest levels since thefinancial crisis of 2008, but still well below 100 percent, a levelreached only three times since 2000. The improved fundingenvironment, together with legislative funding stabilizationenacted in 2012, gave plan sponsors some relief from record levelsof contributions since the 2008 recession.”

Looking forward, Dave Suchsland, another Towers Watson seniorretirement consultant, predicts: “The improved funding environmentwill provide pension plan sponsors with some intriguingopportunities for 2014. We expect the actions we've seen amongcompanies to de-risk their pension plans over the past several years willaccelerate as funding levels continue to improve, especially inlight of increases in PBGC premiums and mortality tables, and projectionscales with increased life expectancy.”