Funding levels for pensions attached to US companies are set to fall below 80% when 2014 accounts are published, according to Moody’s.
The ratings agency issued the warning over pension funding levels as firms enter the full-year reporting season, with a fall in discount levels and rising longevity hitting liabilities.
Moody’s estimated that the companies it rates have an aggregate deficit of $201 billion and an average funding ratio of 78%. The latter figure has fallen from 86% 12 months earlier, the agency said. It expects the data to be confirmed by company accounts in the coming weeks.
The decline in funding was driven by a fall in the discount rate, which Moody’s estimated was 4% at the end of 2014, down from 4.8% a year earlier. The ratings agency said this move could have added as much as $165 billion to aggregate pension liabilities.
In addition, new mortality tables published last year added billions in liabilities to US pensions. Last year, Moody’s warned that increasing longevity would require at least $110 billion of additional contributions from sponsoring companies in the next seven years to meet their obligations to retirees.
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