Pension Funding Index October 2018

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By Charles J. Clark, Zorast Wadia | 12 October 2018

In September, the funded status of the 100 largest corporate defined benefit pension plans rose by $21 billion as measured by the Milliman 100 Pension Funding Index (PFI). The deficit fell to $90 billion, the first time since October 2008 that the PFI deficit is less than $100 billion, primarily due to an increase in the benchmark corporate bond interest rates used to value pension liabilities. The funded status improvement was partially offset by investment losses in September. As of September 30, the funded ratio increased to 94.5%, up from 93.3% at the end of August. The last time we experienced a funding ratio this high dates back 10 years to September 30, 2008, when the funded ratio was 99.4%.

The market value of assets dropped by $6 billion as a result of September’s 0.14% investment loss. The Milliman 100 PFI asset value decreased to $1.540 trillion from $1.546 trillion at the end of August.

The projected benefit obligation decreased by $27 billion during September, lowering the Milliman 100 PFI value to $1.630 trillion from $1.657 trillion at the end of August. The change resulted from an increase of 13 basis points in the monthly discount rate to 4.18% for September from 4.05% in August.