The average U.S. pension plans funded status dropped to 75% as of Nov. 30 after being fully funded at the start of the year, according to an analysis by Merrill Lynch.
Interest rates have dropped 75 basis points since October, increasing the average liability by more than 11% in November alone, said Gordon J. Latter, Merrill Lynch research analyst. The first part of the decline was equity markets and capital markets, and discount rates took it the rest of the way, Mr. Latter said.
The funded status could drop another 5% to 10% by the end of the year because of a significant drop in the equities markets and a decline of roughly 25 basis points in investment grade yields at the beginning of December.