Contributions to U. S. Pension Plans Increase Dramatically

CIEBA Survey Shows Contributions Reach All-Time High

January 6, 2005 – Bethesda, MD – Corporate sponsors of large traditional pension plans contributed more than $40 billion to those plans in 2003 according to a survey conducted by the Committee on Investment of Employee Benefit Assets (CIEBA), an affiliate of the Association for Financial Professionals. The $44 billion in 2003 contributions was more than double the contributions made in 2002 ($21 billion) and four times the average contribution for the previous four years.

CIEBA represents the country's largest retirement funds and its members manage more than $1.1 trillion. The survey assessed 103 corporate plan sponsors responsible for the management of $686 billion in pension assets and $436 billion defined contribution (DC) plan assets. The plans in the survey cover 9.4 million DB plan participants and 5.3 million DC plan participants. Most CIEBA members (95% of those surveyed) sponsor both defined benefit and defined contribution plans. Eighty-three (83) percent of the plan sponsors covered by the survey made a contribution to their defined benefit (DB) plan(s) in 2003.

For defined contribution plans, employer and employee contributions per active employee increased for the ninth consecutive year. The combined total per employee was $7,047 in 2003 compared to $6,600 in 2002.

Both DB and DC plan assets increased from beginning year levels by 20% and 22% respectively. Improved market returns account for much of the increase, but DB assets were also boosted by high corporate contribution levels.

“The high level of contributions demonstrates that CIEBA member plan sponsors have a long-term commitment to meeting the benefit promises they have made and to the retirement security of millions of plan participants,” said Kimberly G. Walker, CIEBA chairman and president, Qwest Asset Management Company. “But, we must not be complacent. Pensions in Crisis, the CIEBA study issued last year, illustrates that various legislative, regulatory and accounting changes now being considered could undermine sponsors’ commitment to defined benefit plans, a cornerstone of retirement income security,” Walker concluded.

Additional survey finding include:

• Defined benefit plans continue to be the primary retirement plan type provided by CIEBA members. DB plans had 57% more assets, covered 78% more assets and paid out 71% more in benefits compared to DC plans.

• Both DB and DC benefit payments represented 7% of year-end assets. Overall, DC plan benefit payments exceeded contributions for the ninth consecutive year.

• DB plan assets were allocated 60% to equities, 29% to fixed income and 11% to other investments. DC plan assets were allocated 32% to diversified equity portfolios, 30% to employer stock, 27% to fixed income, 8% to balanced funds and 3% to other options and loans. Both DB and DC plan equity allocations increased from 2002, but DC plan allocations to employer stock remained the same.

• Most DB plan assets (82%) were actively managed, compared to 51% for DC plans.

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The Committee on Investment of Employee Benefit Assets is a nationally recognized forum for ERISA-governed corporate pension plan sponsors on fiduciary and investment matters. CIEBA is the voice of the Association for Financial Professional (AFP) on employee benefit plan asset management and investment issues.

The Association for Financial Professionals, headquartered in Bethesda, Maryland, supports more than 14,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the preferred resource for financial professionals for continuing education, career development, certifications, research, representation to legislators and regulators, and the development of industry standards. For more information about AFP, visit www.AFPonline.org