Rising stock prices are helping boost the earnings of some of the largest, and often oldest, companies in the country. Those companies are more likely to have pension funds for their workers, and those funds are making more on their investments, which raises their assets. Pension plans are funded at their healthiest level since 2008.
Pension funds are also benefiting from rising interest rates. That's because higher rates reduce the present value of a pension plan's future obligations. Higher interest rates mean assets in the pension plan will grow faster, so there has to be less money in the fund to meet future obligations. The yield on the 10-year Treasury note ended 2013 at 2.97 percent, up from 1.76 percent a year earlier. Interest rates are expected to continue to rise as the economy recovers.
The improved conditions mean companies in the Standard & Poor's 500 index could save as much as $26.4 billion in pension costs this year, according to PNC Institutional Investments.
It's a turnaround from earlier years when sinking stocks and rising interest rates were putting pressure on pension plans.Associated Press