The combined funded status of the 100 largest U.S. corporate defined benefit pension plans studied by Milliman decreased by $26 billion in May, dropping the funding ratio to 85.6%, from 87.2% in April.
The reported attributed the drop to a decrease in the corporate bond interest rate — used as a benchmark to value pension liabilities — to 5.24% in May, from 5.37% in April.
“It’s all about the interest rates,” John Ehrhardt, Milliman principal, consulting actuary and co-author of the Milliman 100 Pension Funding index, said in a telephone interview. “Interest rates are driving the volatility of our index.”
The funding ratio for S&P 1500 companies studied by Mercer also decreased in May, dropping to 86% from 88% in April.
The decline was driven by equity losses of more than 1% and a decrease in yields on high-quality corporate bonds, according to a Mercer news release.
The aggregate assets of the S&P 1500 company plans totaled $1.47 trillion in May, down from $1.72 trillion in April.