Pension Funding Index December 2018

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By Charles J. Clark, Zorast Wadia | 10 December 2018

In November, the funded status of the 100 largest corporate defined benefit pension plans improved by $7 billion as measured by the Milliman 100 Pension Funding Index (PFI).

The deficit fell to $100 billion primarily due to a robust investment gain of 0.72% for the month. Pension plan liabilities improved marginally during November as the benchmark corporate bond interest rates used to value those liabilities slightly increased. As of November 30, the funded ratio increased to 93.7%, up from 93.2% at the end of October.

The market value of assets rose by $7 billion as a result of November’s investment gain of 0.72%. The Milliman 100 PFI asset value increased to $1.485 trillion at the end of November. The cumulative investment return in 2018 has been a loss of 1.49% year-to-date, making it likely these plans will miss the expected return assumption.

The projected benefit obligation (PBO), or pension liabilities, decreased by $1 billion, settling at $1.585 trillion at the end of November. There was a meager increase in the monthly discount rate of one basis point, resulting in 4.41% for November from 4.40% for October.

Over the last 12 months (December 2017 – November 2018), the cumulative asset return for these pensions has been 0.21%, but the Milliman 100 PFI funded status deficit has improved by $105 billion primarily due to rising discount rates. Discount rates have increased over the last 12 months, moving from 3.67% as of November 30, 2017, to 4.41% a year later.