The funded status of the 100 largest U.S. corporate pension plans dropped to 85% in July, down from 85.3% in June, said the latest Milliman 100 Pension Funding index.
The funding drop over the quarter was primarily due to declines in equity and fixed-income returns, said Milliman’s report.
The July investment return was -0.24%. Assets dropped to $1.451 trillion from $1.459 trillion in June. Zorast Wadia, principal, consulting actuary and co-author of the report, noted that although July was a “poor investment return month,” assets for the most part have been performing well, returning 5.61% year-to-date.
Meanwhile, the discount rate rose two basis points to 4.1% in July, up from 4.08% the previous month. The projected benefit obligation as of July 31 totaled $1.708 trillion, down from $1.711 trillion at the end of June.
If the pension funds achieve a median 7.4% return and the discount rate remains at the current 4.1%, the funded status would increase to 86.1% by the year's end, still a 2.2 percentage point drop from 88.3% at the end of December.
Mr. Wadia attributed funding decline over the year to declining interest rates.
Although the monthly discount rate started to
“inch” its way up in June and July, it is still down nearly 60 basis points from the beginning of the year, Mr. Wadia said in a telephone interview.