Top 100 corporate DB plans' July funding deficit hits record

The aggregate deficit of the 100 largest U.S. corporate pension plans studied by Milliman increased $120 billion in July to $533 billion, the largest in the 12-year history of the actuary's monthly report, while the plans' combined funded status fell to a near record low.

The funded status as of July 31 was 70.9%, down from 75.6% at the end of June and just above the record low 70.5% funded status at the end of May 2003. The discount rate last month fell 40 basis points to 3.92%, also a record low for the study.

“This isn't regular,” said John Ehrhardt, principal and consulting actuary at Milliman and co-author of the study, in a telephone interview. “You're talking about the worst month in the history of the 12-year study.”

The 10 lowest discount rates in the history of the study have all been in the past 11 months, Mr. Ehrhardt said. Conversely, eight of the 10 highest rates were in 2000, the first year of the study. Pension plans would need their assets to return 150% over liabilities just to keep pace with their current levels, he added.

The cumulative asset return for the 100 plans was 1.22% for July and was 7.1% for the 12 months ended July 31. However, the funding deficit increased by $349 billion and the funded ratio dropped to 70.9% from 78.7% in that same time period.

Pension liabilities increased $133 billion to $1.83 trillion in June, another record, while pension assets increased $13 billion to an aggregate $1.3 trillion.