Tag Archives: PFI

Corporate pension funded status sees largest improvement of 2016, gaining $71 billion in November

Wadia_ZorastMilliman has released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In November, the funded status for these pension plans experienced its largest increase of the year, improving by $71 billion, primarily due to interest rate gains that reduced the deficit for the Milliman 100 plans to $340 billion. The funded ratio for these plans climbed sharply, increasing three percentage points from 77.2% to 80.3%.

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While plan sponsors are pleased with the third straight month of funded status improvement, all eyes are on interest rates as we near the December 30th measurement date. Discount rates have climbed 66 basis points since their record low in August, now the question is whether we’ll see interest rates climb above 4% by year’s end.

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.63% by the end of 2017 and 5.23% by the end of 2018) and asset gains (11.2% annual returns), the funded ratio would climb to 93% by the end of 2017 and 106% by the end of 2018. Under a pessimistic forecast (3.33% discount rate at the end of 2017 and 2.73% by the end of 2018 and 3.2% annual returns), the funded ratio would decline to 73% by the end of 2017 and 66% by the end of 2018.

Corporate funded status improves by $28 billion in October, biggest boost of 2016

Wadia_ZorastMilliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In October, the funded status for these pension plans experienced its largest increase of the year, improving by $28 billion, primarily due to interest rate gains that resulted in a $45 billion decrease in pension liabilities. The funded ratio for these plans climbed a whole percentage point, from 76.3% to 77.3%.

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This is the second straight month of funded status gains but we’re far from celebrating. These plans are still down $103 billion for the year, thanks to decreases in interest rates and lower-than-expected investment returns. Throw in a divisive election on November 8, and we’ll see what the rest of 2016 has in store for these plans.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.71% by the end of 2016 and 4.31% by the end of 2017) and asset gains (11.2% annual returns), the funded ratio would climb to 79% by the end of 2016 and 90% by the end of 2017. Under a pessimistic forecast (3.51% discount rate at the end of 2016 and 2.91% by the end of 2017 and 3.2% annual returns), the funded ratio would decline to 76% by the end of 2016 and 69% by the end of 2017.

Corporate pension funded status improved by $19 billion in September

Wadia_ZorastMilliman today 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 a $19 billion improvement in funded status, which was primarily due to a $24 billion decrease in pension liabilities. The funded status for these pensions inched upward from 75.6% to 76.3%.

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It had been a lousy quarter for pension funding but this month made up for it. These plans are still down by $130 billion for the year, largely because of ballooning liabilities, but at least September ended with discount rates rising by 10 basis points, in a year where we’ve otherwise seen discount rates mostly decline.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.57% by the end of 2016 and 4.17% by the end of 2017) and asset gains (11.2% annual returns), the funded ratio would climb to 79% by the end of 2016 and 91% by the end of 2017. Under a pessimistic forecast (3.27% discount rate at the end of 2016 and 2.67% by the end of 2017 and 3.2% annual returns), the funded ratio would decline to 75% by the end of 2016 and 68% by the end of 2017.

August resembles July as record-low interest rates continue to drive the pension funding deficit

Wadia_ZorastMilliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In August, these pension plans experienced a $4 billion decrease in funded status, which was due to an increase in pension liabilities and flat asset returns. The funded status for these pensions inched downward from 75.8% to 75.7%.

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Not much movement in pension funding last month. Assets didn’t budge in August, and the discount rate reached yet another record low with a modest step down. For the last three months, the funded ratio has barely moved in spite of continued funding by plan sponsors.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.52% by the end of 2016 and 4.12% by the end of 2017) and asset gains (11.2% annual returns), the funded ratio would climb to 79% by the end of 2016 and 91% by the end of 2017. Under a pessimistic forecast (3.12% discount rate at the end of 2016 and 2.52% by the end of 2017 and 3.2% annual returns), the funded ratio would decline to 73% by the end of 2016 and 67% by the end of 2017.

Record-low interest rates drive another increase in the pension funding deficit

Wadia_ZorastMilliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In July, these pension plans experienced a $5 billion decrease in funded status due to a $29 billion increase in pension liabilities that eclipsed a strong month for asset returns. The funded status for these pensions was essentially flat, shifting from 75.6% to 75.7%.

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Everyone is thinking about records this week with the Olympics underway, but a record-low discount rate is not something these pensions will be applauding. The discount rate’s plunge to 3.33% blew away the prior record of 3.41% from January 2015. Year-to-date, these low rates have contributed to a $186 billion increase in pension liabilities.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.58% by the end of 2016 and 4.18% by the end of 2017) and asset gains (11.2% annual returns), the funded ratio would climb to 80% by the end of 2016 and 92% by the end of 2017. Under a pessimistic forecast (3.08% discount rate at the end of 2016 and 2.48% by the end of 2017 and 3.2% annual returns), the funded ratio would decline to 73% by the end of 2016 and 66% by the end of 2017.

Funded status plummets in June, Brexit a possible culprit

Wadia_ZorastMilliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In June, these pension plans experienced a $46 billion decrease in funded status that was primarily due to a $54 billion increase in pension liabilities. Investment gains partially helped to offset the funded status decline. The funded ratio for these pensions decreased from 77.5% to 75.7% at the end of June. As we pass the midpoint of 2016, the funded status deficit has ballooned to $447 billion, a $140 billion increase over the past six months—Brexit, and an overall discount rate drop of 71 basis points, point to the reasons why.

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Plans with fiscal years ending June 30 had a late-breaking surprise with the passage of Brexit. Falling 23 basis points, U.S. discount rates certainly weren’t immune to the Brexit pain. The silver lining here lies with fixed income investments, which benefited from the discount rate decline. Those with heavy allocations toward fixed income are seeing investment gains.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.75% by the end of 2016 and 4.35% by the end of 2017) and asset gains (11.2% annual returns), the funded ratio would climb to 81% by the end of 2016 and 93% by the end of 2017. Under a pessimistic forecast (3.15% discount rate at the end of 2016 and 2.55% by the end of 2017 and 3.2% annual returns), the funded ratio would decline to 72% by the end of 2016 and 66% by the end of 2017.