The combined funded status of the largest 100 U.S. corporate defined benefit pension plans studied by Milliman increased $79 billion in October, increasing the funding ratio 4.4 percentage points to 78.3%.
The plans‘ cumulative assets rose $15 billion for the month to $1.129 trillion, while liabilities fell $64 billion to $1.443 trillion, according to a Milliman news release. The combined pension funding deficit at month’s end was $314 billion.
John Ehrhardt, Milliman principal, consulting actuary and co-author of the Milliman 100 Pension Funding Index, said in an interview that it was one of the more impressive two-month improvements since the inception of the index but that pension plans have “a long way to go” before reaching full funding. The pension plans were up a combined $67 billion in September.
“It’s almost two years before we get back to 100% funding,” he said, noting that if pensions can maintain a 12.1% annual return and steadily increasing interest rates from 5.25% to 6.5%, then the plans would reach full funding by summer 2012. October ended with a discount rate of 5.27%.