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Posts Tagged ‘Pension Funding Index’

Google+ Hangout: Pension Funding Index (August 2014) and the implications of HATFA

August 20th, 2014 No comments

The funded status of the 100 largest corporate defined benefit pension plans decreased by $5 billion during July as measured by the Milliman 100 Pension Funding Index (PFI). The deficit rose from $252 billion to $257 billion at the end of July, primarily due to declines in equity and fixed income returns during July. As of July 31, the funded ratio decreased from 85.3% to 85.0% since the end of June.

In this month’s PFI Hangout, Zorast Wadia discusses the study’s latest results and the pension smoothing provisions related to the Highway and Transportation Funding Act of 2014 (HATFA).

Corporate pension funded status drops by $5 billion in July

August 14th, 2014 No comments

Milliman today released the results of its latest Pension Funding Index (PFI), which consists of 100 of the nation’s largest defined benefit pension plans. In July, these plans experienced a $3 billion decrease in pension liabilities and an $8 billion decrease in asset value, resulting in a $5 billion increase in the pension funded status deficit.

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For months it’s been interest rates driving up the deficit, but in July the rates cooperated and it was instead poor financial market performance negatively impacting funded status. We’ve seen the deficit increase by more than $70 billion so far in 2014.

This month’s study includes perspective on how the Highway and Transportation Funding Act of 2014 (HATFA) may affect pension contributions next year.

Looking forward, if the Milliman 100 pension plans were to achieve the expected 7.4% median asset return for their pension portfolios, and if the current discount rate of 4.10% were maintained, funded status would improve, with the funded status deficit shrinking to $237 billion (86.1% funded ratio) by the end of 2014 and to $202 billion (88.2% funded ratio) by the end of 2015.

Google+ Hangout: Pension Funding Index, July 2014

July 15th, 2014 No comments

The funded status of the 100 largest corporate defined benefit pension plans increased by $14 billion during June as measured by the Milliman 100 Pension Funding Index (PFI). The deficit improved from $266 billion to $252 billion at the end of June, which is primarily due to investment gains. As of June 30, the funded ratio rose from 84.5% to 85.3%. However, the funded ratio is still down for the year from 88.3% as of December 31, 2013. June was the first month in 2014 when discount rates increased, but only by 0.02%. Fortunately, the strong year-to-date asset performance has mitigated deeper funded status erosion.

Index co-author Zorast Wadia discusses the results on Milliman’s monthly PFI Google+ Hangout with Jeremy Engdahl-Johnson.

Corporate pension funded status improves by $14 billion in June

July 10th, 2014 No comments

Milliman today released the results of its latest Pension Funding Index (PFI), which consists of 100 of the nation’s largest defined benefit pension plans. In June, these plans experienced a $3 billion decrease in pension liabilities and an $11 billion increase in asset value, resulting in a $14 billion decrease in the pension funded status deficit.

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If you want to understand why pension funded status is down this year, consider the fact that June was the first month in 2014 with rising interest rates—and it’s not like we saw a massive swing. Interest rates continue to be the story with these pensions.

Looking forward, if the Milliman 100 pension plans were to achieve the expected 7.4% median asset return for their pension portfolios, and if the current discount rate of 4.08% were maintained, funded status would improve, with the funded status deficit shrinking to $228 billion (86.7% funded ratio) by the end of 2014 and to $173 billion (89.9% funded ratio) by the end of 2015.

Google+ Hangout: Pension Funding Index, June 2014

June 18th, 2014 No comments

The funded status deficit of the 100 largest corporate defined benefit pension plans increased by $10 billion during May as measured by the Milliman 100 Pension Funding Index (PFI). The $268 billion deficit at the end of May is primarily due to a drop in the benchmark corporate bond interest rates used to value pension liabilities. Investment gains helped to partially offset the full extent of liability increases in May. During May, the funded ratio fell from 84.7% down to 84.3%.

PFI co-author Zorast Wadia discusses the index’s latest results on this Milliman Google+ Hangout.

Pension funded status deficit increases by $10 billion in May, reaches $268 billion

June 6th, 2014 No comments

Milliman today released the results of its latest Pension Funding Index (PFI), which consists of 100 of the nation’s largest defined benefit pension plans. In May, these plans experienced a $29 billion increase in pension liabilities and a $19 billion increase in asset value, resulting in a $10 billion increase in the pension funded status deficit.

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In every month of 2014 so far we have seen a decline in interest rates. These pensions have experienced a $43 billion increase in assets, but the market gains have been dwarfed by a $125 billion increase in liabilities.

Looking forward, if the Milliman 100 pension plans were to achieve the expected 7.4% median asset return for their pension portfolios, and if the current discount rate of 4.06% were maintained, funded status would improve, with the funded status deficit shrinking to $241 billion (86.0% funded ratio) by the end of 2014 and to $187 billion (89.2% funded ratio) by the end of 2015.

Google+ Hangout: Pension Funding Index, May 2014

May 12th, 2014 No comments

The funded status deficit of the 100 largest corporate defined benefit pension plans increased by $15 billion during April as measured by the Milliman 100 Pension Funding Index (PFI). The $258 billion deficit at the end of April is primarily due to a drop in the benchmark corporate bond interest rates used to value pension liabilities. Asset improvements helped to partially offset the full extent of liability increases in April. From the end of March through April 30, the funded ratio fell from 85.3% to 84.7%.

PFI co-author Zorast Wadia offers some perspective on the latest results in this Milliman Google+ Hangout.

Pension funded status deficit increases by $15 billion in April

May 7th, 2014 No comments

Milliman today released the results of its latest Pension Funding Index (PFI), which consists of 100 of the nation’s largest defined benefit pension plans. In April, these plans experienced a $21 billion increase in pension liabilities and a $6 billion increase in asset value, resulting in a $15 billion increase in the pension funded status deficit.

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We keep slipping further and further away from full funding. The historic improvement of 2013 has been countered by a $72 billion decrease in funded status so far in 2014, with falling interest rates driving much of the change.

Looking forward, if the Milliman 100 pension plans were to achieve the expected 7.4% median asset return for their pension portfolios, and if the current discount rate of 4.20% were maintained, funded status would improve, with the funded status deficit shrinking to $228 billion (86.5% funded ratio) by the end of 2014 and to $175 billion (89.7% funded ratio) by the end of 2015.

Pension funded status drops by $5 billion in March

April 15th, 2014 No comments

Milliman today released the results of its latest Pension Funding Index (PFI), which consists of 100 of the nation’s largest defined benefit pension plans. In March, these plans experienced a $5 billion increase in pension liabilities in a month with flat investment return, resulting in a $5 billion increase in the pension funded status deficit.

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It was a brutal first quarter, with the deficit for these 100 pensions climbing by $79 billion, which was due to a combination of asset underperformance and interest rate decreases. Funded status greatly improved during 2013 but things have changed course in the first quarter of 2014 as the funding ratio has dropped to 84%.

Looking forward, if the Milliman 100 pension plans were to achieve the expected 7.4% median asset return for their pension portfolios, and if the current discount rate of 4.30% were maintained, funded status would improve, with the funded status deficit shrinking to $232 billion (86.1% funded ratio) by the end of 2014 and to $182 billion (89.1% funded ratio) by the end of 2015.

Google+ Hangout: Pension Funding Index, March 2014

March 6th, 2014 No comments

The funded status of the 100 largest corporate defined benefit pension plans improved by $11 billion during February, as measured by the Milliman 100 Pension Funding Index. The deficit fell to $131 billion from $142 billion at the end of January, which was due to strong investment performance offsetting an increase in the pension benefit obligation (PBO). As of February 28, the funded ratio increased from 91.0% to 91.8% at the end of January. The funded ratio has declined in the first two months of 2014 when compared with the 95.2% funded ratio as of December 31, 2013.

Index co-author Zorast Wadia discusses the results on Milliman’s monthly PFI Google+ Hangout with Jeremy Engdahl-Johnson.