The funded status of the 100 largest U.S. corporate defined benefit plans improved to 83.3% at the end of February, up 370 basis points from January, the Milliman 100 Pension Funding index shows.
Liabilities fell 3.2% to $1.816 trillion at the end of February due to a 25-basis-point increase in the discount rate to 3.63%.
Assets rose 1.3% to $1.513 trillion in February, the result of positive investment returns of 1.7%.
Despite the 25-basis-point increase, February’s discount rate is still the second lowest since Milliman’s study began 15 years ago, said Zorast Wadia, principal, consulting actuary and co-author of the Milliman report, in a telephone interview. January’s discount rate of 3.38% was the lowest on record.
The four months prior to February were nothing but funded status declines, with a $90 billion decline reported in January alone, Mr. Wadia said. February’s gains erased most of January’s deficit. However, the funding ratio is still 20 basis points lower from where it started the year at 83.5%, he said.
If the pension funds achieve a median 7.4% asset return and the discount rate remains at 3.63%, the funding ration would increase to 85.2% by the end of this year and 87.4% by the end of 2016, Milliman predicts.
The Society of Actuaries' strengthened mortality assumptions, which could increase liabilities by 8%, were not factored into Milliman's January or February estimates but will be factored into the firm’s 2015 Pension Funding Study due out at the end of March.