Pension Funding Index, September 2012

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By John W. Ehrhardt, Zorast Wadia | 10 September 2012

Pension liabilities of the 100 largest corporate defined benefit pension plans fell by $23 billion in August while their corresponding assets improved by $11 billion, bringing the Milliman 100 PFI funded status deficit to $498 billion and a 72.4% funded ratio. Despite the modest improvement, the August 31 funded ratio remains well below its December 31, 2011, value of 78.7%.

August’s funded status improvement was primarily due to an increase in corporate bond interest rates, the benchmarks used to value pension liabilities. August’s discount rate increase comes after four consecutive months of interest rate declines. In 2012, the discount rate has declined every month other than August and March. As of August 31, the funded ratio climbed to 72.4%, up from 70.9% at the end of July. The projected benefit obligation (PBO), or pension liabilities, decreased by $23 billion during August, lowering the Milliman 100 PFI value to $1.808 trillion from $1.831 trillion at the end of July 2012. The change resulted from a meager increase of seven basis points in the monthly discount rate to 3.99% for August, from 3.92% for July.

Read the latest Pension Funding Index »