The funded status of 100 of the largest U.S. corporate pension plans decreased four percentage points to 91.2% in January, according to the latest Milliman 100 Pension Funding Index.
While assets decreased $7 billion during the month due to a -0.44% overall return on investments, the funded status drop was almost entirely attributed to a drop in the discount rate, which decreased 28 basis points to 4.55%. Last year did not see a single month with a drop as large as 28 basis points. Overall, the discount rate was up 87 basis points in 2013.
According to the report, asset losses were well below the 3% decline in equity markets. The overall pension deficit nearly doubled to $140 billion from $73 billion at the end of December. Assets totaled $1.443 trillion and liabilities, $1.583 trillion.
“After a win-win year that combined market growth and cooperative interest rates, we’re back to the lose-lose ways where assets fall and liabilities increase,” said John Ehrhardt, principal, consulting actuary and co-author of the report, in a news release. “Hopefully this is just a speed bump on the way to 100% funded status. Unfortunately we’re not quite as well positioned to achieve full funded status now as we were at the end of the year.”
Separately, Aon Hewitt reported the funded status of S&P 500 companies declined 3.2 percentage points to 88%.
The discount rate dropped 19 basis points to 4.67%, while pension assets suffered a 1.08% loss in January, causing a $60 billion increase in the pension deficit.
“Among private-sector defined benefit plans with glidepaths in place, approximately 10% executed a derisking transaction in January, and the average size of those transactions was a 5.85% shift from return-seeking assets to liability-hedging assets,” according to the Aon Hewitt Pension Risk Transfer report.
