The funded status of 100 of the largest U.S. corporate pension plans retreated slightly in August, decreasing 0.5 percentage points to 89.4%, according to the latest Milliman 100 Pension Funding Index.
It was a reversal from the previous month when strong asset returns and an unchanged discount rate boosted plans to about 90% funded. In August, investments were down 0.91% resulting in an overall $14 billion decrease in asset value. Pension liabilities decreased as well, but at a slower rate of $8 billion as the discount rate increased four basis points to 4.77%.
“We were hoping for a bump over 90%. … I think we might see it by the end of this year with interest rates rising and assets holding,” said John Ehrhardt, principal, consulting actuary and co-author of the report, in a phone interview. “I'm expecting a couple more win-win months” this year unless the Syrian civil war or a government shutdown roils the markets.
Year to date, assets have increased by $49 billion and liabilities declined by $180 billion. The total pension deficit stood at $162 billion at the end of August. Total assets ended the month at $1.371 trillion and liabilities, $1.532 trillion.
Over the past 12 months, the cumulative asset return is just 6.36%, but the funded status deficit has improved by $351 billion. The funded status has jumped 17.4 percentage points in the same period.
