The funded status of 100 of the largest U.S. corporate pension plans increased 2.1 percentage points to 91.4% in September, according to the latest Milliman 100 Pension Funding Index.
It is the first time the funded status has eclipsed 90% since July 2011 and the highest reading since October 2008, said John Ehrhardt, principal, consulting actuary and co-author of the report. The Pension Funding Index lost about 20 percentage points in a four-month period following October 2008, he added.
In September, the discount rate was up three basis points to 4.8%, while assets gained 2.1%.
“This past month, there was a slight tick up for discount rates, but it was a good month for equity markets,” Mr. Ehrhardt said in a telephone interview.
Assets were up $27 billion for the month, while liabilities decreased $5 billion, resulting in an overall pension deficit of $132 billion. In the last 12 months, the funded status has improved 17.4 percentage points as a result of a 7.01% asset return and the discount rate increasing by 72 basis points.
“It's a little bit in anticipation of the Fed taking its foot off the throat of interest rates,” Mr. Ehrhardt said of the rise in the discount rate over the past year.
However, October could put a dent in recent gains. Mr. Ehrhardt said no one can predict what will happen in the coming weeks, but a number of scenarios could play out. During the 2011 debt ceiling debate, equity markets and rates fell, although Mr. Ehrhardt said interest rates should go up if investors lose faith in the Treasury.
