Corporate pensions’ funding status boosted by January investment gains, funding ratio at 91%

Milliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In January, these pensions experienced a $19 billion increase in funded status thanks to healthy investment gains. In fact, January’s asset return of 3.35% was greater than any prior monthly asset return in 2018. The funding ratio for the Milliman 100 PFI plans rose from 89.7% at the end of December to 91.0% as of January 31, and the funding status deficit narrowed from $167 billion to $148 billion during the same time period.

“Despite the market turbulence over the past few months, corporate pension funding is back to the same level it was in January 2018,” said Zorast Wadia, coauthor of the Milliman 100 PFI. “It feels like déjà vu: just like in 2018, the year is off to a great start, with strong asset performance and discount rates above 4%. If both hold we’ll be heading in the direction of full funding, but as history has shown, any uncertainty or market volatility could make this year another bumpy ride.”

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.61% by the end of 2019 and 5.21% by the end of 2020) and asset gains (10.8% annual returns), the funded ratio would climb to 104% by the end of 2019 and 121% by the end of 2020. Under a pessimistic forecast (3.51% discount rate at the end of 2019 and 2.91% by the end of 2020 and 2.8% annual returns), the funded ratio would decline to 85% by the end of 2019 and 79% by the end of 2020.

To view the complete Pension Funding Index, click here. To see the 2018 Milliman Pension Funding Study, click here.

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