The combined funded status of the 100 largest U.S. corporate defined benefit plans studied by Milliman increased by $11 billion in February, boosting the funding ratio 0.7 percentage points to 76.8%.
Assets of the 100 plans rose a combined $10 billion, or 1%, to $1.039 trillion, while liabilities decreased 0.1% to $1.352 trillion, according to a Milliman news release. An increase in the monthly discount rate to 5.32%, up 0.02 percentage points from January, led to the decline in liabilities.
The funding deficit as of Feb. 28 was $313 billion, down from $324 billion a month earlier.
The average February asset return of 1.26% was almost double the companies’ expected 0.65% rate of return. The study notes that the funds would have to earn a return of 26.2% for the rest of 2010 for the combined funded ratio to reach 90%.
Milliman predicts a funded ratio of 79% by the end of the year, assuming an 8.1% rate of return and a continued discount rate of 5.32% through Dec. 31.
“For much of 2009 we saw that pension funding status was largely driven by interest rate movement,” John Ehrhardt, co-author of the Milliman 100 Pension Funding Index, said in the news release. “The biggest declines of the last year have come as a result of increasing liabilities. Will we see a countervailing trend in 2010? That certainly wasn’t the case this month. I’m sure most pensions prefer these kinds of relative doldrums to the kind of adverse volatility we saw in 2009, though increasingly it seems we’ll need to see significant, favorable interest rate movement if we’re going to approach full funding this year.”
Mr. Ehrhardt could not be reached for comment.