In June, the funded status of the 100 largest corporate defined benefit pension plans increased by $23 billion as measured by the Milliman 100 Pension Funding Index (PFI). The deficit fell to $118 billion from $141 billion at the end of May due to an increase in the benchmark corporate bond interest rates used to value pension liabilities. As of June 30, the funded ratio climbed to 92.8%, up from 91.6% at the end of May. The mid-year funded ratio is well above the 87.6% at the start of 2018.
June’s -0.09% innvestment return pushed assets down to $1.526 trillion from $1.531 trillion at the end of May.
The projected benefit obligation decreased by $28 billion during June, lowering the Milliman 100 PFI value to $1.644 trillion. The change resulted from an increase of 13 basis points in the monthly discount rate; the rate reached 4.12% for June from 3.99% in May. June’s discount rate marks the highest rate since 4.14% observed since the end of January 2016.
Over the last 12 months (July 2017-June 2018), the cumulative asset returm for these pensions has been 5.39% and the Milliman 100 PFI funded status deficit has improved by $138 billion. The primary reason for the increase in the funded status deficit was discount rate gains over the past 12 months.