As of August 31, 2010, the funded ratio plummeted to 70.1%, down from 75.6% at the end of July 2010 – the lowest funded ratio recorded within the last 10 years for the Milliman 100 PFI.
Milliman said the funded status decrease was primarily due to a significant decrease in corporate bond interest rates that are the benchmarks used to value pension liabilities. The financial markets performed poorly in August 2010 as well.
August’s $17 billion decrease in market value brings the Milliman 100 PFI asset value to $1.076 trillion, down from $1.093 trillion at the end of July 2010. The monthly asset performance was a loss of 1.12%.
The projected benefit obligation (PBO), or pension liabilities, increased by $91 billion during August, moving the Milliman 100 PFI value to $1.536 trillion from $1.445 trillion at the end of July 2010. The change was the result of a 45-basis-point decrease in the monthly discount rate to 4.78% for August (from 5.23% for July).
Over the last 12 months (September 2009-August 2010), the cumulative asset return has been 6.99% and the Milliman 100 PFI funded status has decreased by $162 billion, due primarily to lower trending discount rates. For these 12 months, the funded ratio of the Milliman 100 companies decreased to 70.1% from 77.8%.
If, for the remainder of 2010, the Milliman PFI 100 companies were to achieve the expected 8.1% median asset return and if the current discount rate of 4.78% were maintained for the duration of the year, Milliman said it forecasts the funded ratio of the surveyed plans would increase, to 70.3%.More information is here.