Corporate pension funded status declines by $28 billion in September

Milliman today released the results of its latest Pension Funding Index, which analyzes the 100 largest U.S. corporate pension plans. In September, these pension plans experienced a $28 billion decrease in funded status based on a $19 billion decrease in asset values and a $9 billion increase in pension liabilities. The funded status for these pensions decreased from 83.3% to 81.7%.

2106MEB_Fig1_Blog_600x280

The calendar year began with strong equity performance that seemed so promising, and yet here we are looking at an overall decline in equities for the year. It will take a massive rally in the fourth quarter for these 100 pensions to sniff their annual expected return of 7.3%.

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.34% by the end of 2015 and 4.94% by the end of 2016) and asset gains (11.3% annual returns), the funded ratio would climb to 85% by the end of 2015 and 97% by the end of 2016. Under a pessimistic forecast (4.04% discount rate at the end of 2015 and 3.44% by the end of 2016 and 3.3% annual returns), the funded ratio would decline to 80% by the end of 2015 and 73% by the end of 2016.

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.

Leave a Reply