Pension Funding Index, August 2012

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By John W. Ehrhardt, Zorast Wadia | 06 August 2012

Pension liabilities swelled by $133 billion in July, swamping a $13 billion investment gain and bringing the Milliman 100 PFI funded status deficit to $533 billion and lowering the funded ratio to 70.9%. The favorable investment gain was battered by a continued decline of interest rates on high-quality fixed income investments, which are the standard upon which pension liabilities are measured. A 40-basis-point decrease pushed the monthly discount rate to 3.92%, which is the lowest ever recorded in the 12-year history of the Million 100 PFI.

The $120 billion funded status decrease was also the largest decrease in the history of the Milliman 100 PFI, and it follows a dreadful 2012 second quarter, when the funded status deteriorated by $186 billion.

At 70.9%, the funded ratio is well below its December 31, 2011, value of 78.7%. The only other time that we’ve witnessed a lower funded ratio was on May 31, 2003, when it bottomed out at 70.5%.

Read the latest Pension Funding Index »