High Level of Funding Contributions to U. S. Pension Plans Continues

December 6, 2005 – Bethesda, MD – For the third consecutive year, corporate sponsors of large traditional pension plans contributed more than $20 billion to those plans, according to a survey conducted by the Committee on Investment of Employee Benefit Assets (CIEBA), an affiliate of the Association for Financial Professionals. CIEBA member plan sponsors contributed $22 billion in 2004 -- almost $6,000 per active participant -- with 83% of those surveyed making some contribution to their defined benefit (DB) plans. The median funding level for CIEBA plans in 2004 was 91% compared to 88% in 2003. Over the period from 2002-2004, CIEBA member plan sponsors contributed $87 billion to their plans.

CIEBA represents many of the nation’s largest private sector retirement funds and its members manage almost $1.2 trillion. The survey covered 101 corporate plan sponsors responsible for the management of $726 billion in pension assets and $457 billion in defined contribution (DC) plan assets. Assets under management increased $60 billion comparing 2003 to 2004.

Most CIEBA members -- 94% -- continue to offer both defined benefit and defined contribution plans to their employees. Plans in the survey cover 9.4 million DB plan participants and 5 million DC plan participants. Defined benefit plans continue to be central to the provision of retirement income for most CIEBA members. DB plans had 59% more assets and paid out 66% more in benefits compared to DC plans.

In the defined contribution arena, employer and employee contributions per active employee increased for the tenth consecutive year. The combined total per employee was $7,875 in 2004 compared to $7,047 in 2003. Of those amounts, $2, 249 was contributed by employers in 2004, compared to $2,178 in 2003.

Assets in both DB and DC plans increased from beginning year levels by 7% and 8% respectively. Investment returns account for much of the increase, although DB asset increases also reflect significant corporate contributions. The average investment return for DB plans was approximately 12% (net of all expenses) of beginning of year assets, compared to an average of nearly 10% (net of fees) for DC plan accounts.

"The commitment of CIEBA members to both traditional pension plans and retirement savings plans is demonstrated by their continued funding and sponsorship of these plans for millions of U.S. workers," said Kimberly G. Walker, chairman of CIEBA. "However, while the number of CIEBA member pension plans that have been frozen is relatively small, the trend could accelerate rapidly if some of the policy changes now under consideration were adopted. A CIEBA survey earlier this year showed that adoption of some of the proposed reforms may significantly limit access to benefits for current and future workers," Walker concluded.

Additional survey findings include:

• Benefit payments totaled $90 billion in 2004, of which $56 billion was paid to DB participants and $34 billion to DC participants.
• DB plan assets were allocated 42% to U.S. equity, 19% to international equity, 28% to fixed income and 12% to other investments. DC plan assets were allocated 34% to diversified equity portfolios, 28% to employer stock, 27% to fixed income, 8% to balanced funds and 3% to other options and loans. DC plan diversified equity allocations increased from 2003 by 2 percentage points, while allocations to company stock decreased a similar amount.
• Most DB assets (84%) were actively managed compared to approximately half (52%) of DC assets.
• A significant percentage of CIEBA members now offer some form of advice to DC plan participants. Individual financial planning assistance and interactive advisory programs were offered by 25% and 35% of DC plan sponsors, respectively. Five percent (5%) offered professionally managed participant accounts.

The Committee on Investment of Employee Benefit Assets (CIEBA) is a nationally recognized forum for corporate pension plan sponsors on fiduciary and investment matters. CIEBA is the voice of the Association for Financial Professionals (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,.