August 06, 2012
benefit (DB) plans experienced the worst decrease in funded status in the 12
years since Milliman Inc. began tracking it. ---
Pensions experienced a $120 billion decrease in funded
status based on a $133 billion increase in the pension benefit obligation (PBO)
and a $13 billion increase in asset value. This pushes the pension deficit to a
record $533 billion, surpassing the previous record set on August 31, 2010. The
funded ratio of 70.9% is the second lowest in the history of this study; on May
31, 2003, the funded ratio bottomed out at 70.5%.
In July, the discount rate used to calculate pension
liabilities fell from 4.32% to 3.92%, pushing the PBO up to $1.831 trillion at
the end of the month. The overall asset value for these 100 pensions increased
from $1.284 trillion to $1.297 trillion.
Looking forward, if these 100 pensions were to achieve their
expected 7.8% median asset return and if the current discount rate of 3.92%
were to be maintained throughout 2012 and 2013, these pensions would improve
the pension funded ratio from 70.9% to 72.3% by the end of 2012 and to 76.6% by
the end of 2013.
Milliman Inc. based its results on 100 of the nation’s
largest DB plans.
The complete study is available here.