Milliman today released the results of its latest Pension Funding Index, which consists of 100 of the nation’s largest defined benefit (DB) pension plans. In June, these pensions experienced a $57 billion decrease in funded status based on a $77 billion increase in the pension benefit obligation (PBO) and a $20 billion increase in asset value. The $57 billion decrease in funded status pairs with the combined April and May decreases of $129 billion, increasing the funding deficit by $186 billion during the second quarter.
With the help of the lowest discount rate in the 12-year history of our study, corporate pensions last month saw their funding deficit increase to a near-record $415 billion. This is the second-worst deficit we’ve seen.
In June, the discount rate used to calculate pension liabilities fell from 4.56% to 4.32%, pushing the PBO up to $1.698 trillion at the end of the month. The overall asset value for these 100 pensions increased from $1.263 trillion to $1.283 trillion.
Looking forward, if these 100 pensions were to achieve their expected 7.8% median asset return and if the current discount rate of 4.32% were to be maintained throughout 2012 and 2013, these pensions would improve the pension funded ratio from 75.6% to 77.4% by the end of 2012 and to 82.0% by the end of 2013.