The funded ratio of the 100 largest U.S. corporate defined benefit pension plans studied by Milliman decreased 0.3 percentage points to 75% in October — the same as in August, confirmed index co-author John Ehrhardt, principal at Milliman.
The plans had a combined $7 billion decline in assets, partially offset by a $3 billion drop in liabilities. For the first time in six months, the overall decline in funded ratio was the result of an asset decline; previous decreases were because of an increase in liabilities, Mr. Ehrhardt said in an interview.
“We’re hoping for rising interest rates, which would drop liabilities, and a continued rise in asset values; you’d have a win-win,” he said.
The 100 plans had combined assets of $1.016 trillion in October, down less than 1% from September. Total liabilities were $1.355 trillion, also down less than 1% from a month earlier. That leaves the overall funding deficit at $339 billion.
The cumulative investment return has been 9.12% over the last 12 months.
The report predicts that with an investment return of 8.1% for the remainder of 2009 and a discount rate of 5.24%, the funding deficit would drop slightly to $337 billion, and the funded ratio will improve slightly to about 75.2%.