100 Largest Pensions Face Record Loss in October

November 17, 2008 (PLANSPONSOR.com) - The Milliman 100 Pension Funding Index, shows the nation's 100 largest defined benefit pension plans faced a record asset value loss in October.

The 100 largest corporate plans posted an asset value loss of more than $120 billion — and after adjustment for liability gains, surrendered a total of $59 billion, dropping pension funding to 92.7%, a 12-percentage-point decline from the funded ratio at the beginning of the year, Milliman said in a press release. “We’ve been issuing this index for eight years and have never seen a monthly asset loss so large,” said John Ehrhardt, co-author of the Milliman 100 Pension Funding Index, in the announcement.

Ehrhardt noted that, as in September, pension liabilities fell due to a rise in the monthly discount rate, which somewhat offset the asset loss. He added that the volatile times “will likely result in a $40 billion reduction in corporate earnings in 2009.”

Assuming no return and stable discount rates for the rest of the year, Milliman expects these pensions to reach a 91.3% funded ratio by December 31, a pension deficit of $93 billion, and an annual surplus loss of $154 billion. The loss in funded status would result in a $154 billion charge to corporate balance sheets at the end of the 2008 fiscal year.

In April, Milliman reported that first quarter asset losses, coupled with dropping interest rates during January 2008, wiped out nearly all of the funded status gains made in 2007 (See 2008 Wipes Out Almost All 2007 Pension Funding Gains ).

More reports on the Milliman 100 Pension Funding Index are here .