The funded status decline was primarily the result of an increase of $39 billion in the plans’ liabilities during April from a reduction in the discount rate, which more than offset investment gains on plan assets of $6 billion. As of April 30, 2010, the funded ratio fell to 82.4%, down from 84.4% at the end of March 2010.
April’s $6 billion gain raises the Milliman 100 PFI asset value to $1.121 trillion, up from $1.115 trillion at the end of March 2010. The monthly asset return was approximately 0.96%. By comparison, the Milliman 2010 Pension Funding Study reflects that the monthly investment return on pension assets, set by the companies in the study, will be 0.65% (8.10% annualized).
The projected benefit obligation (PBO), or pension liabilities, increase in April brings the Milliman 100 PFI value to $1.36 trillion from $1.321 trillion at the end of March 2010. The change resulted from a decrease in the monthly discount rate to 5.69% for April (from 5.92% for March 2010), Milliman said.
Over the last 12 months (May 2009-April 2010), the cumulative asset return has been 18.51%; however, the Milliman 100 PFI funded status has decreased by $14 billion, due primarily to lower trending discount rates. For these 12 months, the funded ratio of the Milliman 100 companies changed from 81% to 82.4%.
Milliman projects that if the 8.1% expected 2010 asset return in the pension plan portfolios of Milliman PFI 100 companies is achieved and the current discount rate of 5.69% is maintained for the balance of 2010, the Milliman 100 PFI funded status will increase, with a projected pension deficit of $231 billion and a funded ratio of 83.2%. The firm said asset returns of 21.5% 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.
The Milliman 100 Pension Funding Index projects data for 100 of the nation’s largest defined benefit pension plans.The April Index is here.