The plans’ cumulative deficit for 2011 was $464.4 billion, the largest in the 11-year history of the Milliman 100 Pension Funding Index and more than double the $228 billion deficit at the end of 2010. December’s funding ratio was the fourth-lowest month in the history of the Milliman 100; May 2003 was the lowest month, with a funding ratio of 70.5%.
The plans’ cumulative investment return was 3%, or $12.3 billion, but the projected benefit obligation increase was 22.1%, resulting in an increase of $248.7 billion.
John Ehrhardt, New York-based principal, consulting actuary and co-author of the study, said funded status could be improved based on “higher-than expected” employer contributions. The study’s calculations are based on 2010’s record level of $60 billion in employer contributions.
“I wouldn’t be surprised if (that level is) closer to $80 billion last year and close to $100 billion this year,” Mr. Ehrhardt said in a telephone interview. “The only relief is going to be positive asset performance.”
Mr. Ehrhardt said interest rates will remain low over the next two years. If the discount rate remains the same in 2012 and 2013 and companies achieve the expected 8% investment return, funding ratios would end this year and next at 75.9% and 79.6%, respectively.