Milliman: Uptick in discount rate drives $106 billion pension funding improvement

The 100 largest U.S. corporate pension plans' funded status in January experienced the second largest monthly improvement in the 12-year history of the Milliman 100 Pension Funding Index.

The funded status increased to 81.7% at the end of January, up from 76.5% at the end of 2012. The aggregate deficit decreased by $106 billion, mainly from an increase in the discount rate.

The discount rate increased 27 basis points to 4.45%, resulting in an $83 billion drop in liabilities. Assets returned 1.79% for the month, a $23 billion increase.

The overall projected benefit obligation for the plans decreased to $1.665 trillion from $1.748 trillion, while the overall value for the plans increased to $1.36 trillion from $1.337 trillion, giving the plans a total deficit of $305 billion.

The strong month completely erased the $74 billion deficit increase over the course of 2012.

If the 100 pension plans were to achieve their expected 7.8% median asset return and the discount rate remains flat, the funded status would improve to 86.1% at the end of this year and 91.1% at the end of 2014.