Milliman: Rising discount rate helps corporate plans' funding ratios in March

After multiple reports estimating that funding ratios for corporate pension plans decreased in March, a report from Milliman goes against the general consensus, calculating that ratios have actually increased over the month.

And the cause of this rise? The consulting and actuarial firm attributes the increase in a news release to "a massive surge in the monthly discount rate."

Milliman estimates that despite market volatility and the global COVID-19 pandemic, the funding ratio among corporate plans climbed to 85.6% as of March 31 from 82.1% as of Feb. 29.

March's funding improvement was the result of the monthly discount rate increasing to 3.39% from 2.69%. The 70-basis-point increase was the fifth largest that Milliman has recorded in 20 years and a surge not seen since December 2009.

The rise in the discount rate offset the $85 billion in investment losses corporate plans experienced in March.

"It's a stunning twist of fate that a month so turbulent as March — given the market conditions and the ongoing global pandemic — actually resulted in positive funding news for corporate pensions," said Zorast Wadia, principal and consulting actuary at Milliman, in the news release.