Milliman Index Shows Pension Funded Status Declined $33B in April

May 14, 2010 ( - The funded status of the 100 largest corporate defined benefit pension plans deteriorated by $33 billion during April 2010 as measured by the Milliman 100 Pension Funding Index (PFI).

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.