The funded status of the 100 largest U.S. corporate pension plans decreased 20 basis points to 83.3% at the end of November because of weak investment returns, the Milliman 100 Pension Funding index showed Monday.
Assets declined 0.21% to $1.429 trillion, the result of a meager 0.16% investment return. Liabilities were unchanged at $1.716 trillion, while the discount rate was unchanged from October, at 4.16%.
If the pension funds achieve a median 7.3% asset return and the discount rate remains at 4.16%, the funding ratio would increase to 85.6% by the end of this year and 88% by the end of 2016, Milliman predicted in its report.
“November was another middling month for these pensions, and with the calendar flipping soon the book is nearly written on 2015,” said John Ehrhardt, principal, consulting actuary and co-author of the report in a news release accompanying the report. “But with the Fed potentially raising interest rates at the end of the calendar year, it could be an exciting finish.”
Despite November's dip, the funded status is still above the 81.5% of year-end 2014, primarily due to a 32-basis-point increase in the discount rate, said Zorast Wadia, principal, consulting actuary and co-author of the report in a telephone interview.
Year-to-date, investments returned 2.13%. By comparison, the median expected return for 2015 is 7.3%. October posted the highest monthly return in 2015 so far at 2.97%.