The funded status of the 100 largest U.S. corporate defined benefit plans improved to 82.6% at the end of April, up 170 basis points from March, the Milliman 100 Pension Funding index showed Thursday.
April’s funding gains were primarily the result of a 17-basis-point increase in the discount rate to 3.82%, which reduced liabilities, Milliman said. In April liabilities fell 2.24% to $1.79 trillion.
Asset values also dropped — 0.13% to $1.48 trillion — based on “subpar” investment activity, Milliman said. Investments returned 0.22% over the month.
“Someone once said April is the cruelest month, but for these pension funds, last month was less cruel than what happened over the course of the first quarter,” said John Ehrhardt, principal, consulting actuary and co-author of the report, in a news release. “We’re still a long ways away from full-funded status, but the slight rise in interest rates at least moved things in the right direction to start the second quarter of 2015.”
If the pension funds achieve a median 7.3% asset return and the discount rate remains at 3.82%, the funding ratio would increase to 84.1% by the end of this year and 86.4% by the end of 2016, Milliman predicts.