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Plan Sponsors Accelerate Contributions Ahead of September 15th Deadline

Plan sponsors made additional 2017 contributions to their pension plan by September 15, 2018, to take advantage of the greater deduction benefit at the previous corporate tax rate (35%). Under the Tax Cuts and Jobs Act, 2018 contribution deductions to be subject to the lower 21% corporate income tax rate. Going forward, regardless of the tax benefit and given low expected rates of returns on the investment portfolio, plan sponsors should still view contributions as their primary tool to improve their funded status.

It was estimated that an additional $10 billion in contributions were made for 2017 plan year. The growing list of companies to do this included Northrup Grumman, Boise Cascade, Kellogg Company, John Deere, United Parcel Service, and Lockheed Martin. Some companies such as Weyerhaeuser Co., who made an additional $300 million pension contribution in the third quarter, are using contributions to support additional liability de-risking. Weyerhaeuser plans to lean on their improved funded status and offer another lump sum window in the fourth quarter. Ball Corporation also increased contributions for 2017 plan year, which they are following with a $176 million group annuity contract purchase in the fourth quarter.