De-risking efforts by plan sponsors reduce pension obligations, but continued discount rate declines produce record-high pension plan deficits in 2012: “Pension de-risking activities were pursued by several of the top 100 U.S. pension plans during 2012. Data collected for fiscal years ending in the year indicates that at least 15 companies engaged in significant risk-reduction efforts, each resulting in a settlement of more than $100 million of plan liability. However, the de-risking measures were accompanied by increased pension cost. Generally, there were larger plan asset reductions than there were corresponding plan liability reductions. Settlement and curtailment accounting entries resulted in a fiscal year 2012 charge to earnings of $7.1 billion. The net balance sheet effect for many plans was a decline in pension funded status from 2011. We expect that this funding erosion, along with implications stemming from the 2012 enactment of the interest rate stabilization law (the Moving Ahead for Progress in the 21st Century, [MAP-21]), will result in higher plan sponsor contributions during the 2013 fiscal year.”
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