The funded status of the 100 largest U.S. corporate pension plans fell 150 basis points to 83.4% at the end of August, the Milliman 100 Pension Funding index showed Wednesday.
Asset values declined 2.88% to $1.417 trillion, the result of investment losses of 2.51% for the month, the largest monthly loss in the last six years, Milliman said.
Liabilities declined 1.11% to $1.699 trillion due to a nine-basis-point increase in the discount rate to 4.23%, which was not enough to offset the asset decline.
“Most of the time, interest rate movements drive pension funded status, but the stock market volatility we saw in August stole the show,” said John Ehrhardt, principal, consulting actuary, and co-author of the Milliman report, in a news release. “For the year, these pensions had performed well on the asset side, but August erased all those gains.”
If the pension funds achieve a median 7.3% asset return and the discount rate remains at 4.23%, the funding ratio would increase to 84% by the end of this year and 86.2% by the end of 2016, Milliman predicts.