Pension Funding Index, March 2013

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By John W. Ehrhardt, Zorast Wadia | 06 March 2013

The funded status of the 100 largest corporate defined benefit pension plans dropped by $6 billion during February as measured by the Milliman 100 Pension Funding Index (PFI). This comes after last month’s large funded status improvement of $107 billion, the second best in the 12-year history of this study. The deficit increased to $311 billion from $305 billion at the end of January, primarily due to the drop in the benchmark corporate bond interest rates used to value pension liabilities. February’s strong investment gains were not enough to offset the pension liability increases. As of February 28, the funded ratio fell to 81.5%, down from 81.7% at the end of January.

The projected benefit obligation (PBO), or pension liabilities, increased by $17 billion during February, raising the Milliman 100 PFI value to $1.683 trillion from $1.666 trillion at the end of January. The change resulted from a modest decrease of five basis points in the monthly discount rate to 4.40% for February, from 4.45% for January.