Corporate Pension Funding Ratio Nears 94%

The Milliman 100 Pension Funding Index shows that the funded status of the 100 largest corporate defined benefit (DB) pension plans improved to 93.9% during November.

This is an improvement upon index findings from October, which showed a 91.9% funded status. An analysis of the index, authored by John Ehrhardt and Zorast Wadia, both principals and consulting actuaries for Milliman, indicates that the funded status of plans grew by $34 billion between October and November.

The authors note the deficit decline during that period, from $126 billion to $93 billion, is due to a rise in the benchmark corporate bond interest rates used to value pension liabilities. Asset returns also exceeded expectations and contributed to the funding improvement.

Pension liabilities decreased from $1.556 trillion in October to $1.533 trillion in November. This change was based on an increase of 11 basis points in the monthly discount rate, going from 4.67% in October to 4.78% in November.

Results of the index are based on pension plan accounting information disclosed in the footnotes of companies’ annual reports for the 2012 fiscal year, as well as previous fiscal years.

The text of the analysis of the index can be downloaded here.