The 100 largest U.S. corporate defined benefit pension plans studied by Milliman ended 2009 with a funded ratio of 77.7%, up 2.2 percentage points from November and down 0.6 percentage points from a year earlier.
December 2009 was the second month of improvement in aggregate funding, following six months of declines. Assets for the month increased $5 billion and liabilities decreased $32 billion, for a $37 billion increase in funded status.
John Ehrhardt, co-author of the Milliman 100 Pension Funding Index, noted that the decline in liabilities was because of an increase in the discount rate, which jumped 0.31 percentage points to 5.4%. He noted that increases in liabilities had offset asset gains for most of 2009.
“If interest rates move up in 2010 and assets move up, it could be a win-win,” he said in an interview.
The cumulative asset return for the 100 plans in 2009 was 13.21%, while the combined pension benefit obligation was 13.46%.
The overall pension funding deficit among the 100 plans was $300 billion as of Dec. 31, up 12% for the year.
Total pension assets grew to $1.041 trillion, up 0.5% from November.
The analysis also noted that companies are likely to make significant cash contributions to their pension plans in the first quarter 2010 to satisfy funding requirements imposed by the Pension Protection Act. He noted that many companies opted to defer their 2009 contributions until 2010, adding that there will be a “doubling-up” effect in contributions.
