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Posts Tagged ‘Zorast Wadia’

Milliman Hangout: Pension Funding Index, February 2015

February 11th, 2015 No comments

The funded status of the 100 largest corporate defined benefit pension plans dropped by $90 billion during January as measured by the Milliman 100 Pension Funding Index (PFI). The $90 billion funded status decline was the eighth largest monthly drop in the 15-year history of the Milliman 100 PFI. The funded status deficit ballooned from $292 billion to $382 billion since December 2014 due to the 42 basis point decline in the benchmark corporate bond interest rates used to value pension liabilities. Pension assets had a monthly above-expected return due to strong fixed income asset return and this helped to counter liability losses. The funded ratio decreased from 83.5% to 79.6%.

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

Milliman 100 Pension Funding Index retreats to 79.6%

February 5th, 2015 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. The funded status of the 100 largest corporate defined benefit pension plans dropped by $90 billion during January, as measured by the Milliman 100 Pension Funding Index (PFI). The $90 billion funded status decline was the 8th largest monthly drop in the 15-year history of the Milliman 100 PFI. The funded status deficit ballooned to $382 billion from $292 billion at the end of December 2014, due to the 42 basis point decline in the benchmark corporate bond interest rates used to value pension liabilities.

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The projected benefit obligation (PBO), or pension liabilities, increased to $1.876 trillion from $1.775 trillion at the end of December 2014. The change resulted from a decrease of 42 basis points in the monthly discount rate to 3.38% for January from 3.80% for December 2014. January’s discount rate is the lowest in the history of the Milliman 100 PFI. The last time we observed a comparable discount rate change was in July 2012 when discount rates fell 40 basis points ending at 3.92%. January’s precipitous drop is even more impactful.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.93% by the end of 2015 and 4.53% by the end of 2016) and asset gains (11.4% annual returns), the funded ratio would climb to 91% by the end of 2015 and 104% by the end of 2016. Under a pessimistic forecast with similar interest rate and asset movements (2.83% discount rate at the end of 2015 and 2.23% by the end of 2016 and 3.4% annual returns), the funded ratio would decline to 73% by the end of 2015 and 66% by the end of 2016.

Milliman Hangout: Pension Funding Index, January 2015

January 13th, 2015 No comments

The funded status for the 100 largest corporate defined benefit plans decreased by $22 billion during December 2014, according to the Milliman 100 Pension Funding Index (PFI). Historically low interest rates were the dominant factor in the $105 billion deficit increase during 2014. While higher than expected investment returns produced a solid $81 billion gain, pension liabilities increased by $186 billion. The funded ratio was 83.6% as of December 31, 2014, down compared with the ratio on December 31, 2013, of 88.3%.

For more perspective on January’s PFI, watch our latest Milliman Hangout featuring coauthor Zorast Wadia.

Corporate pension funding deficit grows by more than $100 billion in 2014 because of plummeting interest rates

January 7th, 2015 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 December, these plans experienced a $19 billion increase in pension liabilities and a $3 billion decrease in asset value, resulting in a $22 billion increase in the pension funded status deficit and a funded ratio of 83.6%. For the year, despite market returns of $81 billion, these pensions experienced a $105 billion increase in the pension funded status deficit, fueled by a $186 billion increase in liabilities as interest rates fell to a historic low at year end.

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What a difference a year makes. Last year at this time we were celebrating a historic rally for these pensions, thanks to—surprise surprise—cooperative interest rates. This year it’s the opposite story, with interest rates falling to 3.80%, the lowest rate we’ve ever seen in the 14-year history of this study. With rates this low, the liability increase for these pensions outstripped strong asset performance by more than $100 billion.

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 3.80% were maintained, funded status would improve, with the funded status deficit shrinking to $255 billion (85%.7 funded ratio) by the end of 2015 and to $217 billion (87.9% funded ratio) by the end of 2016. This forecast assumes 2014 aggregate contributions of $44 billion and 2015 and 2016 aggregate contributions of $31 billion.

Google Hangout: Pension Funding Index, December 2014

December 5th, 2014 No comments

The funded status of the 100 largest corporate defined benefit pension plans fell by $8 billion during November as measured by the Milliman 100 Pension Funding Index (PFI). The deficit widened from $263 billion to $271 billion, which was primarily due to another decrease in the benchmark corporate bond interest rates used to value pension liabilities. The funded ratio declined from 84.8% to 84.6% at the end of November.

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

Corporate pension funded status drops another $8 billion in November

December 4th, 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 November, these plans experienced a $26 billion increase in pension liabilities and an $18 billion increase in asset value, resulting in an $8 billion increase in the pension funded status deficit.

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The story this year seems to be the same month after month, and in November it’s exactly the same as it was in October—an $8 billion increase in the funded status deficit, with liabilities exceeding positive asset performance. For the year, interest rates have dropped by 79 basis points, driving a $167 billion liability increase.

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 3.89% were maintained, funded status would improve, with the funded status deficit shrinking to $230 billion (87% funded ratio) by the end of 2015 and to $191 billion (89.2% funded ratio) by the end of 2016. This forecast assumes 2014 aggregate contributions of $44 billion and 2015 and 2016 aggregate contributions of $31 billion.

Google+ Hangout: Pension Funding Index, November 2014

November 17th, 2014 No comments

The funded status of the 100 largest corporate defined benefit pension plans fell by $8 billion during October as measured by the Milliman 100 Pension Funding Index (PFI). The deficit widened from $255 billion to $263 billion at the end of October, which was primarily due to a decrease in the benchmark corporate bond interest rates used to value pension liabilities. As of October 31, the funded ratio declined from 85.1% to 84.8%.

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

Corporate pension funded status drops by $8 billion in October

November 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 October, these plans experienced a $22 billion increase in pension liabilities and a $14 billion increase in asset value, resulting in an $8 billion increase in the pension funded status deficit.

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These pensions have had a great year from an asset perspective, with $65 billion of improvement since the start of the year. But over the same time, interest rate decreases have ballooned the liabilities for these pensions by $141 billion. Low interest rates continue to drive this funding deficit.

Liabilities may be further influenced by the introduction of new mortality tables. The latest PFI has not been adjusted to estimate for the impact of possibly moving to the mortality tables recently finalized by the Society of Actuaries, but preliminary estimates indicate a possible increase in liabilities of between 6% to 8%.

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 4.00% were maintained, funded status would improve, with the funded status deficit shrinking to $255 billion (85.3% funded ratio) by the end of 2014 and to $219 billion (87.4% funded ratio) by the end of 2015.

Google+ Hangout: Pension Funding Index, October 2014

October 10th, 2014 No comments

The funded status of the 100 largest corporate defined benefit pension plans improved by $26 billion during September as measured by the Milliman 100 Pension Funding Index (PFI).

The deficit dropped from $279 billion to $253 billion in September, which was primarily due to an increase in the benchmark corporate bond interest rates used to value pension liabilities. The funded status would have improved further were it not for September’s investment losses. As of September 30, the funded ratio grew from 84.1% to 85.2%.

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 $26 billion in September

October 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 September, these plans experienced a $45 billion decrease in pension liabilities and a $19 billion decrease in asset value, resulting in a $26 billion decrease in the pension funded status deficit.

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We just had our best month of the year, but it wasn’t enough to make the third quarter a positive one for these pensions. After five straight quarters of improving funded status, we’ve had three straight losing quarters this 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 $241 billion (85.9% funded ratio) by the end of 2014 and to $206 billion (88.0% funded ratio) by the end of 2015.