The aggregate funded status of corporate pension plans remained relatively unchanged in September, said reports from Milliman and Mercer.
The funded status of the 100 largest U.S. corporate pension plans rose 70 basis points to 76.3% in September because of falling liabilities, the Milliman 100 Pension Funding index showed Thursday.
Liabilities dropped 0.35% to $1.848 trillion in September, the result of a 10-basis-point increase in the discount rate to 3.42%. Asset values also fell 1.2% to $1.41 trillion due to a nearly flat investment return of 0.07%.
If the pension funds achieve a median 7.2% asset return and the discount rate remains at 3.42%, the funding ratio would increase to 76.8% by the of 2016 and 78.7% by the end of 2017, Milliman predicted.
For the quarter, the funded status is down 70 basis points. Year-to-date through Sept. 30, the funded status is down 5.4 percentage points.
According to Mercer, the estimated aggregate funding ratio of pension plans sponsored by S&P 1500 companies remained at 77% in September.
An eight-basis-point-increase in the discount rate to 3.46% in September was offset by mixed equity market returns, holding the funded status stable.
The S&P 500 index returned -0.1% and the MSCI EAFE index returned 1% last month.
The estimated aggregate value of pension fund assets of S&P 1500 companies totaled roughly $1.86 trillion as of Sept. 30, down 0.5% from Aug. 31, while estimated aggregate liabilities totaled about $2.42 trillion, down 0.8% from last month.
Year-to-date through Sept. 30, discount rates are down more than 80 basis points and the S&P 500 index is up a little more than 6%, slightly below the average assumed rate of return for most defined benefit pans, said Jim Ritchie, a principal in Mercer's retirement practice, in a news release. The funded status was 82% as of Dec. 31.
He added: “Even if the Fed raises interest rates in November, the impact on long-term rates and equity markets will not likely provide a meaningful improvement in the financial condition of pension plans by the end of the year.”
For the quarter ended Sept. 30, the funded status is up 1 percentage point, according to Mercer.