Corporate pension asset values drop in September for the first time in six months, funded ratio dips to 84.5%

Milliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans.

In September, corporate pensions experienced an investment loss of -0.74% – a $17 billion decline in asset values – marking the first time in six months that returns have not been above-average. At the same time, the monthly discount rate climbed slightly, from 2.54% at the end of August to 2.57% as of September 30, lowering pension liabilities by $9 billion for the month. As a result, the Milliman 100 PFI funded status declined by $8 billion during September, with the funded ratio dropping slightly from 85.0% to 84.5%.

This was a dizzying few months for corporate pensions, with discount rates hitting historic lows while investment returns had equally noteworthy gains. However, the result was a solid third quarter for the Milliman 100 plans, with the funded ratio improving from 83.5% at the end of June to 84.5% as of September 30.

Looking forward, under an optimistic forecast with rising interest rates (reaching 2.72% by the end of 2020 and 3.32% by the end of 2021) and asset gains (10.5% annual returns), the funded ratio would climb to 88% by the end of 2020 and 103% by the end of 2021.  Under a pessimistic forecast (2.42% discount rate by the end of 2020 and 1.82% by the end of 2021 and 2.5% annual returns), the funded ratio would decline to 83% by the end of 2020 and 76% by the end of 2021.

To view the complete Pension Funding Index, click here. To see the 2020 Milliman Pension Funding Study, click here.

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