In February, the funded status of the 100 largest corporate defined benefit pension plans dropped by $35 billion as measured by the Milliman 100 Pension Funding Index (PFI). The funded status deficit widened to $364 billion from $329 billion at the end of January, mainly due to the drop in the benchmark corporate bond interest rates used to value pension liabilities. As of February 29, the funded ratio dropped to 79.1%, down from 80.8% at the end of January.
The market value of assets dropped by $5 billion as a result of February’s investment loss of 0.02%. The Milliman 100 PFI asset value decreased to $1.376 trillion from $1.381 trillion at the end of January.
The projected benefit obligation (PBO) increased to $1.740 trillion at the end of February. The change resulted from a decrease of 13 basis points in the monthly discount rate to 4.06% for February from 4.19% for January.
Over the last 12 months (March 2015- February 2016), the cumulative asset return for these pensions has been -3.27% and the Milliman 100 PFI funded status deficit has worsened by $20 billion. The funded ratio of the Milliman 100 companies has decreased over the past 12 months to 79.1% from 81.2%.
If the Milliman PFI companies were to achieve the expected 7.3% median asset return for their pension plan portfolios and the current discount rate of 4.06 % were maintained during years 2016 and 2017, we forecast the funded status of the surveyed plans would increase. This would result in a projected pension deficit of $338 billion by the end of 2016 and a projected pension deficit of $302 billion by the end of 2017.