The funding ratio of 100 of the largest U.S. corporate defined benefit pension plans rose to 91.8% at the end of February, according to the latest Milliman 100 Pension Funding Index.
Strong market performance that offset an increase in liabilities contributed to the improved funding ratio, which was up from 91% at the end of January.
The February investment return was 2.28%, bringing the market value of assets up to $1.473 trillion as of Feb. 28 from $1.441 trillion the month before, said Zorast Wadia, Milliman principal, consulting actuary and co-author of the report, in a telephone interview.
“If you annualize that that's a 31% return,” Mr. Wadia said. “If you look at the last 12 months, we only did better than that in October 2013 when we did 2.34%.”
“(It) more than made up for January when we had a -0.57% return,” Mr. Wadia said.
While discount rates fell for the second straight month in February, they fell only nine basis points to 4.46%, which the returns outdistanced. The projected benefit obligation as of Feb. 28 totaled $1.604 trillion, up from $1.583 trillion the month before.
The discount rate in January dropped by 28 basis points.
“We actually hadn't seen a 28-basis-point drop in interest rates all of last year,” Mr. Wadia said. “The last time we saw that was way back in July 2012.”
Despite the February improvement, the funding ratio is behind the year-end number of 95.2%. Milliman estimates that if the Milliman 100 pension plans returned an expected 7.5% median return for the rest of 2014 and the current discount rate were maintained, the funding ratio would increase to 96.4%.