In June, the funded status of the 100 largest corporate
defined pension plans increased by $36 billion as measured by the Milliman 100
Pension Funding Index (PFI). The deficit fell to $244 billion at the end of
June primarily due to an increase in the benchmark corporate bond interest
rates used to value pension liabilities. As of June 30, the funded ratio rose
to 85.6%, up from 84.1% at the end of May. June marked the third consecutive
month where interest rates rose and funded status improved.
The projected benefit obligation (PBO), or pension
liabilities, decreased by $64 billion during June, lowering the Milliman 100
PFI value to $1.692 trillion, down from $1.756 trillion at the end of May. The
PBO change resulted from an increase of 28 basis points in the monthly discount
rate to 4.25% for June from 3.97% for May. Prior to June 2015, the last time
the discount rate was at or above 4.00% was in October 2014.
Over the last 12 months (July 2014 to June 2015), the
cumulative asset return for these pensions has been 5.14% and the Milliman 100
PFI funded status deficit has improved by $27 billion. The discount rate as of
a year ago on June 30, 2014, was 4.08%, 17 basis points lower than where it
stands as of June 30, 2015.
If the Milliman 100 PFI companies were to achieve the
expected 7.3% median asset return for their pension plan portfolios and the
current discount rate of 4.25% were 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 $227 billion by the end of 2015 and a
projected pension deficit of $189 billion by the end of 2016.
Source: Milliman
US
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