The funded status of the 100 largest corporate defined
pension plans fell by $90 billion during January as measured by the Milliman
100 Pension Funding Index (PFI). This decline was the eighth largest monthly
drop in the 15-year history of the Milliman 100 PFI. The funded status deficit
ballooned to $382 billion from $292 billion at the end of December 2014.
Pension assets, however, had a monthly above-expected return. As of January 31,
the funded ratio decreased to 79.6%, down from 83.5% at the end of December
2014.
The projected benefit obligation (PBO), or pension
liabilities, increased to $1.876 trillion from $1.775 trillion at the end of
December 2014. The change resulted from a decrease of 42 basis points in the
monthly discount rate to 3.38% for January from 3.80% for December 2014.
January’s discount rate is the lowest in the history of the Milliman 100 PFI.
The market value of assets increased by $11 billion as a result of January’s
investment return of 1.07%. The Milliman 100 PFI asset value rose to $1.493
trillion.
Over the last 12 months (February 2014 – January 2015),
the cumulative asset return for these pensions has been 11.04%, but the
Milliman 100 PFI funded status deficit has deteriorated by $135 billion. The
funded ratio of the Milliman 100 companies has decreased over the past 12
months to 79.6% from 84.9%.
If the Milliman 100 PFI companies were to achieve the
expected 7.4% (as per the 2014 Milliman Pension Funding Study) median asset
return for their pension plan portfolios and the current discount rate of 3.38%
was maintained in 2015 and 2016, we forecast that the funded status of the
surveyed plans would increase. This would result in a projected pension deficit
of $347 billion (funded ratio of 81.5%) by the end of 2015 and a projected pension
deficit of $308 billion (funded ratio of 83.7%) by the end of 2016.
Source: Milliman
US
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