In February, the funded status of the 100 largest corporate defined benefit pension plans worsened by $6 billion as measured by the Milliman 100 Pension Funding Index (PFI). The decline was fueled by discount rates that plunged below 4%. As of February 28, the funded status deficit of these plans widened to $322 billion from $316 billion at the end of January.
The market value of assets grew by $19 billion as a result of February’s robust investment return of 1.74%. The Milliman 100 PFI asset value increased to $1.419 trillion from $1.400 trillion at the end of January.
The projected benefit obligation increased to $1.741 trillion from $1.716 trillion at the end of January. A decrease of 11 basis points brought interest rates to 3.89% for February from 4.00% for January.
Over the last 12 months (March 2016-February 2017), the cumulative asset return for these pensions has been 10.64% and the Milliman 100 PFI funded status deficit has improved by $47 billion. The funded ratio of the Milliman 100 companies has increased over the past 12 months to 81.5% from 78.4%.
If the Milliman 100 PFI companies were to achieve the 7.2% (as per the 2016 pension funding study) median asset return for their pension plan portfolios and the current discount rate of 3.89% were maintained during years 2017 and 2018, we forecast the funded status of the surveyed plans would increase. This would result in a projected pension deficit of $295 billion by the end of 2017 and a projected pension deficit of $256 billion by the end of 2018.