The funding level of some of the largest U.S. corporate pension plans climbed in 2021, in part due to strong equity markets, consulting firm Willis Towers Watson PLC said on Monday.

Companies that sponsor defined-benefit plans promise to pay out fixed amounts to retirees, often over decades. Businesses have been phasing out these plans in favor of defined-contribution plans such as 401(k)s to limit the financial burden on their balance sheets.

Defined-benefit plans had an aggregated funding status of 96% at the end of 2021, up from 88% a year earlier, Willis Towers Watson's review of 361 Fortune 1000 companies showed. That's the highest funding level since 2007, when it stood at 107%.

Funding levels have soared since the early stages of the coronavirus pandemic, helped by a galloping stock market. Federal Reserve officials are forecasting at least three interest rate increases beginning this spring, which could plump companies' pension plans further. Higher interest rates lead to lower pension liabilities, meaning companies need to set aside less money for future payments.

"Since 2008, many sponsors have better positioned their plans relative to market risk, primarily through changes in investment allocation and settlement activity," said Joseph Gamzon, managing director of the retirement practice at Willis Towers Watson.

-Mark Maurer

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The Hackett Group Inc. published this content on 04 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 January 2022 01:24:09 UTC.