Pension Funding Index February 2017

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By Zorast Wadia, Charles J. Clark | 09 February 2017

In January, the funded status of the largest corporate defined benefit plans improved by $9 billion as measured by the Milliman 100 Pension Funding Index (PFI). The funded status deficit narrowed to $316 billion from $325 billion at the end of December due to investment gains incurred during January. As of January 31, the funded status rose to 81.6%, up from 81.1% at the end of December.

The market value of assets grew by $7 billion as a result of January’s investment return of 0.87%. The Milliman 100 PFI asset value increased to $1.400 trillion from $1.393 trillion at the end of December.

The projected benefit obligation decreased to $1.716 trillion at the end of January. The change resulted from a miniscule increase of one basis point in the monthly discount rate to 4.00% for January from 3.99% in December.

Over the last 12 months (February 2016-January 2017), the cumulative asset return for these pensions has been -8.86%, but the Milliman 100 PFI funded status deficit only improved by $23 billion. The funded ratio of the Milliman 100 companies has increased over the past 12 months to 81.6% from 79.9%.

If the Milliman 100 PFI companies were to achieve the expected 7.2% (as per the 2016 pension funding study) median asset return for their pension plan portfolios and the current discount rate of 4.00% 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 $287 billion (funded ratio of 83.3%) by the end of 2017 and a projected pension deficit of $250 billion (funded ratio of 85.5%) by the end of 2018.