Tag Archives: Charles Clark

Corporate pension funding up $7 billion in November, $41 billion in past three months

Milliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In November, these pensions experienced a $7 billion improvement, increasing for the third month in a row and bringing the total funded status gain to $41 billion since August 31. This three-month run marks the strongest performing period of 2017.

November’s improvement was the result of robust 0.82% investment gains and pension plan liabilities that remained stagnant as the corporate bond interest rate used to value those liabilities was flat for the month. The funded ratio for the Milliman 100 plans ticked up 0.4% to 85.2% as of November 30.

Barring a calamity in the next month, 2017 has been a stellar year with strong double-digit investment returns for corporate pensions. If discount rates can hold and December investment returns mirror the past 11 months, the funded ratio for these plans will end higher than it was in 2016. Should discount rates end the year with a strong uptick, this will result in more funding optimism as we turn the corner into the new year.

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.32% by the end of 2018 and 4.92% by the end of 2019) and asset gains (11.0% annual returns), the funded ratio would climb to 99% by the end of 2018 and 115% by the end of 2019. Under a pessimistic forecast (3.02% discount rate at the end of 2018 and 2.42% by the end of 2019 and 3.0% annual returns), the funded ratio would decline to 78% by the end of 2018 and 71% by the end of 2019.

To view the complete Pension Funding Index, click here. To see the 2017 Milliman Pension Funding Study, click here.

To receive regular updates of Milliman’s pension funding analysis, contact us here.

Corporate pensions experience back-to-back monthly gains with $7 billion improvement in October

Milliman has released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In October, these pensions’ funded status experienced a $7 billion uptick, increasing for the second month in a row and bringing the total funded status gain to $32 billion since August 31. October’s improvement was the result of robust 1.19% investment returns, which saw the Milliman PFI plans’ funded ratio climb to 84.7% for the month. Cumulative investment gains in 2017 are 9.57% year-to-date; by comparison, the 2017 Milliman Pension Funding Study reported that the monthly median expected investment return during 2016 was 0.57% (7.0% annualized).

While October’s investment returns are well above expectations, funded status gains were partially offset by the continued low discount rate environment. It will be interesting to see what, if any, changes are in store to interest rate strategy with the nomination of a new Federal Reserve chair.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.76% by the end of 2017 and 4.36% by the end of 2018) and asset gains (11.0% annual returns), the funded ratio would climb to 87% by the end of 2017 and 100% by the end of 2018. Under a pessimistic forecast (3.56% discount rate at the end of 2017 and 2.96% by the end of 2018 and 3.0% annual returns), the funded ratio would decline to 84% by the end of 2017 and 77% by the end of 2018.

To view the complete Pension Funding Index, click here. To see the 2017 Milliman Pension Funding Study, click here.

To receive regular updates of Milliman’s pension funding analysis, contact us here.

Corporate pensions experience largest gains of the year in September

Milliman has released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In September, these pension plans experienced their largest improvement year-to-date, with a $26 billion increase in funded status. The improvement was the result of a nine-basis-point increase in discount rates coupled with market value gains, which saw the Milliman PFI plans’ funded ratio climb from 83.0% to 84.3% for the month.

While September’s positive performance is welcome news for these pensions, it’s tempered somewhat by the recent release of the new mortality tables by the Internal Revenue Service (IRS). Much of the fourth quarter will be spent in anticipation of how the new regulation will affect 2018 cash contribution funding, Pension Benefit Guaranty Corporation (PBGC) premiums, and de-risking efforts.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.84% by the end of 2017 and 4.44% by the end of 2018) and asset gains (11.0% annual returns), the funded ratio would climb to 87% by the end of 2017 and 101% by the end of 2018. Under a pessimistic forecast (3.54% discount rate at the end of 2017 and 2.94% by the end of 2018 and 3.0% annual returns), the funded ratio would decline to 83% by the end of 2017 and 76% by the end of 2018.

To view the complete Pension Funding Index, click here. Also, to see the 2017 Milliman Pension Funding Study, click here.

To receive regular updates of Milliman’s pension funding analysis, contact us here.

Corporate pensions face largest monthly loss of 2017 in August

Milliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In August, the funded status of these plans fell by $17 billion—the largest loss year-to-date—due to a decrease in the benchmark corporate bond interest rates used to value pension liabilities. The Milliman 100 PFI plans saw their deficit swell from $281 billion as of July 31 to $298 billion at the end of August. The funded ratio dropped from 83.8% to 83.0% over the same time period, and is now below where it was at the beginning of 2017 for the first time this year.

The funded ratio for the Milliman 100 plans continues to teeter up and down during 2017, and now we find it below the mark set at the beginning of the year. It will be interesting to see how discount rates will change over the next few months and how the potential release of updated mortality tables will affect pension contributions and funded status going forward.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.80% by the end of 2017 and 4.40% by the end of 2018) and asset gains (11.0% annual returns), the funded ratio would climb to 87% by the end of 2017 and 100% by the end of 2018. Under a pessimistic forecast (3.40% discount rate at the end of 2017 and 2.80% by the end of 2018 and 3.0% annual returns), the funded ratio would decline to 81% by the end of 2017 and 74% by the end of 2018.

To view the complete Pension Funding Index, click here. To receive regular updates of Milliman’s pension funding analysis, contact us here.

July’s corporate pension funded status steady amid investment gains, discount rate decline

Milliman has released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In July, the funded status of these plans rose by $4 billion as the Milliman 100 PFI deficit shrank from $286 billion at the end of June to $282 billion at the end of July. The slight increase in funded status resulted from strong investment gains that compensated for a decrease in the benchmark corporate bond interest rates used to value pension liabilities. The funded ratio inched up from 83.5% the previous month to 83.7% as of July 31. Over the past seven months the funded ratio of these plans has been teetering between 83% and 84%.

Given the relatively strong market returns contrasted with persistently low interest rates, it’s no surprise that there’s been little movement this year in the funded ratio for the Milliman 100 plans. With the lack of funded ratio improvement, we’re seeing a number of sponsors make additional contributions with an eye towards shoring up funded status in the future.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.96% by the end of 2017 and 4.56% by the end of 2018) and asset gains (11.0% annual returns), the funded ratio would climb to 89% by the end of 2017 and 102% by the end of 2018. Under a pessimistic forecast (3.46% discount rate at the end of 2017 and 2.86% by the end of 2018 and 3.0% annual returns), the funded ratio would decline to 81% by the end of 2017 and 74% by the end of 2018.

To view the complete Pension Funding Index, click here. To receive regular updates of Milliman’s pension funding analysis, contact us here.

Despite steep Q2 discount rate decline, corporate pension funded ratio still ahead of the start of the year

Milliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In June, the funded status of these plans fell by $4 billion, the result of lower-than-expected investment returns and a decrease in the benchmark corporate bond interest rates used to value pension liabilities. The Milliman 100 PFI plans saw their deficit grow from $281 billion to $285 billion with a drop of two basis points from May to June. As of June 30, the funded ratio had inched down from 83.7% to 83.5%, though that midyear number is still slightly above where it was at the start of 2017.

While June saw lackluster investment returns of 0.35%, overall the Milliman 100 PFI assets performed better than expected in Q2—some much needed good news for these plans, whose liabilities continue to grow as discount rates decline.

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.04% by the end of 2017 and 4.64% by the end of 2018) and asset gains (11.0% annual returns), the funded ratio would climb to 90% by the end of 2017 and 103% by the end of 2018. Under a pessimistic forecast (3.44% discount rate at the end of 2017 and 2.84% by the end of 2018 and 3.0% annual returns), the funded ratio would decline to 80% by the end of 2017 and 73% by the end of 2018.

To view the complete Pension Funding Index, click here. To receive regular updates of Milliman’s pension funding analysis, contact us here.