Corporate pension funded ratio in September exceeds 91%; a level last observed in 2008

Milliman today released the results of its latest Pension Funding Index, which consists of 100 of the nation’s largest defined benefit pension plans. In September, the funded status of the 100 largest corporate defined benefit pension plans improved by $32 billion as measured by the Milliman 100 Pension Funding Index (PFI). The deficit dropped to $132 billion from $164 billion at the end of August, which was primarily due to a robust investment gain of more than 2% during September. The PFI funded ratio increased to 91.4% from 89.3% at the end of August. This marked the fourth consecutive quarter of improvement in funded status.

Pension Funding Index - October 2013

It looks like the good news surrounding pension funded status has returned, at least temporarily, after a slight reversal of direction in August. The market value of assets increased by $27 billion as a result of September’s investment gain of 2.10%.

Under an optimistic forecast with rising interest rates (reaching 4.95% by the end of 2013 and 5.55% by the end of 2014) and asset gains (11.5% annual returns), the funded ratio would climb to 95% by the end of 2013 and 113% by the end of 2014. Under a pessimistic forecast with similar interest rate and asset movements (4.65% discount rate at the end of 2013 and 4.05% by the end of 2014 and 3.5% annual returns), the funded ratio would decline to 90% by the end of 2013 and 84% by the end of 2014.

About John Ehrhardt

John is a principal and consulting actuary in the New York office of Milliman. He joined the firm in 1983. John is the author of Milliman’s annual Pension Funding Survey and the Milliman 100 Pension Funding Index, which analyze the funded status of the pension plans of 100 of the largest U.S. corporations.

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