A strong second half of 2006 helped S&P pension funds produce returns that significantly reduced their underfunding in 2006, preliminary data from Standard & Poor's indicate. Pension funds reduced their underfunding from $140 billion in 2005 to an estimated $36 billion in 2006. By comparison, however, the 1999 bull market led to $280 billion in overfunding.
"The improved position of pensions is the direct result of a healthier market in 2006, as market returns contributed $162 billion into the funds in addition to the $48 billion contributed by employers and $25 billion contributed by employees," says S&P analyst Howard Silverblatt. "Based on our projections, we expect to see 2007 pensions to be fully funded on an aggregate basis by year-end."
Standard & Poor's preliminary data also show that other post employment benefits (OPEB) are underfunded. Within the S&P 500, 307 firms had an aggregate underfunding of $292.2 billion in their OPEB obligations in 2006, down from $320.9 billion in 2005.