Effect of the 1987 Stock Market Decline on Selected Large Pension Plans

Pursuant to a congressional request, GAO reviewed the 1987 investments of large pension plans to determine: (1) how the 1987 stock market decline affected plan assets; (2) whether there was a relationship between the proportion of funds invested in stock and changes in asset values; and (3) how defined-benefit and defined-contribution plans fared during the market decline. GAO found that: (1) although total assets decreased substantially during the last quarter of 1987, when the decline occurred, significant gains during the first 9 months of the year more than offset the decrease; (2) most plan asset values increased for the year, and total assets increased by 6 percent; (3) although 1987 asset values were related to the proportion of assets in stock and to changes in the stock market, other factors also affected asset values; and (4) although defined benefit and defined contribution plans fared about the same, a larger percentage of defined contribution plans had asset decreases, and their asset changes were more volatile and dispersed.