The combined funded status of the 100 largest U.S. corporate defined benefit pension plans studied by Milliman decreased by $83 billion in June, dropping the funded ratio 10.7 percentage points to 84.4%.
“The second quarter of 2010 was the worst three-month period we've seen since the meltdown of 2008,” John Ehrhardt, Milliman principal, consulting actuary and co-author of the Milliman 100 Pension Funding Index, said in a news release. “The cumulative asset performance for these 100 pensions (for the quarter) was a loss of 3.62%, resulting in a decline in funded status of $171 billion.”
The 100 plans fared better than the S&P 1500 companies studied by Mercer, which experienced a five percentage point drop in funded ratio in June to 73%, according to the Mercer report issued this week. Similar to the Mercer study, the funded ratio of the typical corporate U.S. pension plan dropped six percentage points in June to 74%, according an analysis by BNY Mellon Asset Management.
The funded status is its lowest since 2003, according to Milliman.
Investments would have to return 25.6% between now and the end of the year for the 100 plans to reach a funded ratio of 80%, given current discount rates of 5.26%. This scenario would lower the overall deficit to $289 billion, the release said.
Mr. Ehrhardt could not be reached for further comment.