Pension liabilities of the 100 largest corporate defined benefit pension plans fell by $23 billion in August, while assets improved by $11 billion, according to the latest Milliman 100 Pension Funding Index. That brought the Milliman 100 funded status deficit to $498 billion and a 72.4 percent funded ratio.
Even though August numbers showed improvement, they are still well below the 78.7 percent funded ratio of Dec. 31, 2011.
August’s funded status improved because of an increase in corporate bond interest rates, the benchmarks used to value pension liabilities. In 2012, the discount rate has declined every month but March and August.
The projected benefit obligation, or pension liabilities, decreased by $23 billion during August, lowering the Milliman 100 PFI value to $1.808 trillion from $1.831 trillion at the end of July 2012.
The Milliman 100 PFI asset value increased by $11 billion during August, raising the index’s value to $1.309 trillion from $1.298 trillion at the end of July. The increase was due to investment gains of 1.02 percent for the month. By comparison, the Milliman 2012 Pension Funding Study, published in March, reported that the median expected investment return during 2011 was 0.63 percent.
Over the past year, the cumulative asset return has been 6.38 percent, while the Milliman 100 PFI funded status has deteriorated by $262 billion. During this time, the funded ratio of the Milliman 100 companies dropped to 72.4 percent from 83.8 percent.