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Funded ratio for 100 largest U.S. corporate pensions hits 10-year high in September

Staff Writer |
Milliman released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans.

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In September, these pensions experienced a $21 billion increase in funded status due to an increase in the benchmark corporate bond interest rates used to value pension liabilities.

From August 31 to September 30, the monthly discount rate rose 13 basis points, climbing from 4.05% to 4.18%.

As a result, the projected benefit obligation (PBO) for these plans decreased by $27 billion, but was offset by a $6 billion decrease due to investment losses. As of September 30, the funding ratio for the Milliman 100 PFI was at 94.5%, up from 93.3% the previous month.

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.33% by the end of 2018 and 4.93% by the end of 2019) and asset gains (10.8% annual returns), the funded ratio would climb to 98% by the end of 2018 and 114% by the end of 2019.

Under a pessimistic forecast (4.03% discount rate at the end of 2018 and 3.43% by the end of 2019 and 2.8% annual returns), the funded ratio would decline to 93% by the end of 2018 and 85% by the end of 2019.

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