Pension funded status improved by 1.2% in 2015

Milliman today released the results of its latest Pension Funding Index, which analyzes the 100 largest U.S. corporate pension plans. In December, these pension plans experienced a $7 billion decrease in funded status based on an $18 billion decrease in asset values and an $11 billion decrease in pension liabilities. The funded status for these pensions decreased from 83.3% to 82.7%. For the year, these pensions improved their pension status by $35 billion, growing from 81.5% at the end of 2014 to 82.7% at the end of 2015.

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The good news is that pension funded status improved in 2015. The bad news is that this improvement was underwhelming and we’re basically in the same place we were a year ago, despite cooperative interest rates.

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.82% by the end of 2016 and 5.42% by the end of 2017) and asset gains (11.3% annual returns), the funded ratio would climb to 95% by the end of 2016 and 109% by the end of 2017. Under a pessimistic forecast (3.62% discount rate at the end of 2016 and 3.02% by the end of 2017 and 3.3% annual returns), the funded ratio would decline to 75% by the end of 2016 and 69% by the end of 2017.