The funding ratios of the 100 largest U.S. corporate defined benefit plans dropped in April due to a drop in the discount rate, according to the latest Milliman 100 Pension Funding Index.
The funding ratio dropped to 84.7% from 85.3% the previous month, while the monthly discount rate decreased 10 basis points to 4.2% from 4.3%.
Assets rose $6 billion to $1.427 trillion from $1.421 trillion at the end of March, while the projected benefit obligation went up $21 billion to 1.685 trillion. The asset return for the month was 0.75%.
“We keep slipping further and further away from full funding,” said John Ehrhardt, principal, consulting actuary and co-author of the report, in a news release. “The historic improvement of 2013 has been countered by a $72 billion decrease in funded status so far in 2014, with falling interest rates driving much of the change.”
If the pension funds achieve a median 7.4% expected rate of return and the discount rate remains at the current 4.2%, the funding ratio would improve by year-end to 86.5%.