This is based on a $14 billion decrease in the pension benefit obligation (PBO) and a $15 billion increase in assets, according to the most recent Pension Funding Index (PFI) produced by Milliman, Inc. The March improvement of $29 billion results in a cumulative improvement of $106 billion in the first quarter of 2013. The latest PFI reflects data from the annual update of the Milliman 100 companies’ 2012 financial figures included in “Milliman’s 2013 Pension Funding Study,” which was released in March.
“We’ve followed a record deficit at the end of 2012 with a record first quarter to open 2013,” said John Ehrhardt, co-author of the study. “The funded ratio has gone from 77% at the end of last year to just under 83% at the end of the first quarter, which is about as strong of a rally as we could hope for in this persistent low-interest-rate environment.”
In March, the discount rate used to calculate pension liabilities increased from 4.16% to 4.22%, decreasing the PBO from $1.665 trillion to $1.651 trillion at the end of the month. The overall asset value for these 100 pensions increased from $1.351 trillion to $1.366 trillion.
Looking forward, if these 100 pension plans were to achieve their expected 7.5% median asset return and if the current discount rate of 4.22% were to be maintained throughout 2013 and 2014, their pension funded ratio would improve from 82.7% to 86.1% by the end of 2013 and to 91.3% by the end of 2014.
The complete study can be found here.