Largest Corporate DB Plans See Funding Bump in February

March 10, 2010 ( - The funded status of the 100 largest corporate defined benefit pension plans improved by $11 billion during February 2010, as measured by the Milliman 100 Pension Funding Index (PFI).

Milliman said the funded status increase was primarily due to the assets of these plans increasing by $10 billion during February due to investment gains. Plan liabilities had a comparatively small decrease of $1 billion as the discount rate movement had a minor increase.

As of February 28, 2010, the funded ratio of the plans in the Index was 76.8%, up from 76.1% at the end of January 2010.

February’s $10 billion increase in market value raises the Milliman 100 PFI asset value to $1.039 trillion, up from $1.029 trillion at the end of January 2010. The monthly asset return was approximately 1.26%, compared to companies’ expected monthly asset return rate of 0.65% (8.10% annualized) found by the Milliman 2009 Pension Funding Study.

At the same time, the projected benefit obligation (PBO), or pension liabilities, decreased by $1 billion during February, moving the Milliman 100 PFI value to $1.352 trillion from $1.353 trillion at the end of January 2010 due to an increase in the monthly discount rate to 5.32% for February (from 5.30% for January 2010).

Over the last 12 months the cumulative asset return has been 23.6% and the Milliman 100 PFI funded status has fallen by $1 billion. For these 12 months, the funded ratio of the Milliman 100 companies changed from 73.8% to 76.8%.

If the companies were to achieve an expected return of 8.1% and the current discount rate of 5.32% were maintained for the balance of 2010, Milliman forecasts the funded status of the 100 surveyed pension plans would increase, with a projected pension deficit of $287 billion and a funded ratio of 79% on December 31. Asset returns of 26.2% for the rest of 2010 would be needed to reach a funded ratio of 90% and a projected deficit of $136 billion at the end of the year, Milliman said.

The Milliman PFI is here.