Milliman analysis: Pension funding status nears 94% A $34 billion improvement in November drops pension deficit below $100 billion for the first time in five years
SEATTLE, Dec. 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 November, these plans experienced an $11 billion increase in asset value and a $23 billion decrease in pension liabilities. The pension funding deficit decreased to $93 billion at the end of November.
"We haven't seen an 11-digit pension funding deficit since before the 2008 financial crisis," said John Ehrhardt, co-author of the Milliman Pension Funding Index. "Pension assets have improved by more than 10% this year, and the pension liabilities have steeply declined. Now we just wait and see how the year concludes, with all eyes focused on both discount rates and financial markets."
Year-to-date, assets have improved by $118 billion and the projected benefit obligation has been reduced by $180 billion, resulting in a massive improvement in funded status and increasing the funded ratio to 93.9%.
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 4.78% were maintained, funded status would improve, with the funded status deficit disappearing (100.0% funded ratio) by the end of 2014 and a surplus of $92 billion (105.9% funded ratio) accumulating by the end of 2015.
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.