The funded status of the 100 largest U.S. corporate defined benefit plans fell to 81% at the end of March, down 20 basis points from February, the Milliman 100 Pension Funding index showed Thursday.
A combination of falling discount rates and “flat asset performance,” resulted in the slight funding decline, Milliman said.
Liabilities increased 0.22% to $1.832 trillion at the end of March, the result of a two-basis-point drop in the discount rate to 3.65%. March’s discount rate drop, while small, still marks the fifth consecutive month in which the discount rate has dropped.
During the month, assets fell 0.13% to $1.483 trillion. Investment returns for March were relatively flat at 0.25%.
If the pension funds achieve a median 7.3% asset return and the discount rate remains at 3.65%, the funding ratio would increase to 82.5% by the end of this year and 84.9% by the end of 2016, Milliman predicts.
“Last month, these pensions continued to languish in the low-interest-rate doldrums,” said John Ehrhardt, principal, consulting actuary and co-author of the report, in a news release. “Whether or not rates climb between now and the end of the year will likely determine whether or not these pensions can meaningfully reduce the funded status deficit before year end.”
