Falling interest rates punished defined benefit pension plans last year (like Jason Pierre- Paul has been punishing quarterbacks) while mediocre asset returns weren’t good enough to keep pace with growing pension obligations especially when that growth was turbocharged by lower discount rates (we assume a 100 basis point drop in pension discount rates for calendar year companies). We estimate that in the aggregate the pension plans of the companies in the S&P 500 ended 2011 $458 billion underfunded (74% funded), a $212 billion decline from the $246 billion in underfunding (84% funded) as of the companies’ most recent reported year-end. On the bright side, that’s an improvement from the $477 billion of underfunding that we had estimated last October (see our October 10, 2011 report, From Bad to Worse, S&P 500 Pension Underfunding Hits $477 Billion) as a fourth quarter rally in the stock market helped to alleviate some of the pain.

Pensions

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