The funding ratio of 100 of the largest U.S. corporate defined benefit plans fell in May due to falling interest rates, according to the latest Milliman 100 Pension Funding Index.
The funding ratio fell to 84.3%, down from 84.7% the previous month, while the monthly discount rate dropped 14 basis points to 4.06% from 4.2% in April.
“The main story year-to-date is declining interest rates,” said Zorast Wadia, principal, consulting actuary and co-author of the report, in a telephone interview.
“Assets are going up, (but) liabilities are rising at a faster pace,” Mr. Wadia said.
Assets rose to $1.446 trillion, up 1.3% the end of the April. Meanwhile, liabilities increased to $1.715 trillion, up 1.8% from the end of April.
Mr. Wadia noted that if the pension funds achieve a median 7.4% asset return and the discount rate remains at the current 4.06%, the funding ratio would increase by year-end to 86%, still a 2.3 percentage point drop from 88.3% at the end of December.
“If the current situation holds, 2014 will be a down year,” Mr. Wadia said.