The combined funded status of the 100 largest U.S. corporate defined benefit pension plans studied by Milliman declined by $108 billion in August, dropping the funding ratio 5.5 percentage points to 70.1%.
“It’s all about interest rates,” John Ehrhardt, Milliman principal, consulting actuary and co-author of the Milliman 100 Pension Funding Index, said in a news release. “For months we’ve been tracking how corporate bond interest rates are contributing to a ballooning projected benefit obligation. Combine this kind of interest rate activity with lackluster asset performance and what you have is the worst funded status in a decade.”
Assets of the 100 plans decreased by a combined $17 billion to $1.076 trillion in August, while liabilities increased $91 billion to $1.536 trillion, according to the news release.
The pension funding deficit, as of Aug. 31, increased to $460 billion.
Mr. Ehrhardt could not be reached for further comment.