Largest Corporate DB Plans See Funding Bump in February

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.