Milliman analysis: Corporate pension funded status drops by $6 billion in August After three consecutive months of funded status improvement and following a record 12 months of strong performance, the funded ratio retreats to 89.4%
SEATTLE, Sept. 9, 2013 /PRNewswire/ -- Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Pension Funding Index, which consists of 100 of the nation's largest defined benefit pension plans. In August, these plans experienced a $14 billion decrease in asset value and an $8 billion decrease in pension liabilities. The pension funding deficit increased to $162 billion at the end of August.
"We knew the good news surrounding pension funded status couldn't last forever, though the increase to the deficit in August was marginal," said John Ehrhardt, co-author of the Milliman Pension Funding Index. "As the third quarter comes to a close, the pensions analyzed in our index could realistically end the year at over 90% funded status. The year's pension funding narrative is still a long way from complete, but you have to like where we are with four months to go."
Year-to-date, assets have improved by $49 billion and the projected benefit obligation has been reduced by $180 billion, resulting in a $229 billion improvement in funded status and increasing the funded ratio to 89.4%.
Looking forward, if the Milliman 100 pension plans were to achieve the expected 7.5% median asset return for their pension portfolios, and if the current discount rate of 4.77% were maintained, funded status would improve, with the funded status deficit narrowing to $138 billion (91.0% funded ratio) by the end of 2013 and $55 billion (96.4% funded ratio) by the end of 2014.
Milliman is among the world's largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information, visit www.milliman.com
About the Milliman 100 Pension Funding Index
For the past 13 years, Milliman has conducted an annual study of the 100 largest defined benefit pension plans sponsored by U.S. public companies. The Milliman 100 Pension Funding Index projects the funded status for pension plans included in our study, reflecting the monthly impact of market returns and interest-rate changes on pension funded status, utilizing the actual reported asset values, liabilities, and asset allocations of the companies' pension plans.
The results of the Milliman 100 Pension Funding Index were based on the actual pension plan accounting information disclosed in the footnotes to the companies' annual reports for the preceding fiscal year and for previous fiscal years. In addition to providing the financial information on the funded status of U.S. qualified pension plans, the footnotes may also include figures for the companies' nonqualified and foreign plans, both of which are often unfunded or subject to funding standards different from those for U.S. qualified pension plans. The results do not represent the funded status of the companies' U.S. qualified pension plans under ERISA.
SOURCE Milliman, Inc.