Pension Funding Index September 2018

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

In August, the funded status of the 100 largest corporate defined benefit pension plans fell by $3 billion as measured by the Milliman 100 Pension Funding Index (PFI).The deficit widened to $110 billion from $107 billion due to a decrease in the benchmark corporate bond interest rates used to value pension liabilities. The funded status decline was partially offset by August’s robust investment gain of 0.85%. As of August 31, the funded ratio dipped slightly to 93.3%, down from 93.5% at the end of July.

The market value of assets rose by $9 billion as a result of August’s investment gain. The Milliman 100 PFI asset value increased to $1.547 trillion from $1.538 trillion at the end of July.

The projected benefit obligation increased by $12 billion during August, raising the Milliman 100 PFI value to $1.657 trillion from $1.645 trillion at the end of July. The change resulted from a six basis point decrease in the monthly discount rate, dropping to 4.05% in August from 4.11% in July.

Over the last 12 months (September 2017-August 2018), the cumulative asset return for these pensions has been 5.5% and the Milliman 100 PFI funded status deficit has improved by $148 billion. The primary reason for the improvement in the funded status has been discount rate gains over the past 12 months.