Pension Funding Index, March 2012

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

The funded status of the 100 largest corporate defined benefit pension plans improved by $20 billion during February as measured by the Milliman 100 Pension Funding Index (PFI). The deficit declined to $413 billion from $433 billion at the end of January 2012, primarily due to February’s strong investment gains. The benchmark corporate bond interest rates used to value pension liabilities dropped by only one basis point in February, tying the all time low rate of 4.25%, last observed in December 2011. As of February 29, the funded ratio increased to 75.5%, up from 74.3% at the end of January.

February’s $20 billion increase in market value brings the Milliman 100 PFI asset value to $1.276 trillion, up from $1.252 trillion at the end of January. The increase was powered by an investment gain of 1.87% for the month. By comparison, the 2011 Milliman Pension Funding Study, published in March 2011, reported that the median expected investment return during 2010 was 0.64% (8.00% annualized). The expected rate of return for 2011 will be updated in the 2012 Milliman Pension Funding Study, due out later this month.

Read the latest Pension Funding Index »