This improvement was due to a $24 billion improvement in asset value that offset a $4 billion increase in the pension benefit obligation (PBO). The asset-driven improvement continues the modest rally that has so far characterized 2012, the company said.
“Slowly but steadily, these 100 pensions are chipping away at the pension funding deficit,” said John Ehrhardt, co-author of the Milliman Pension Funding Study. “Interest rates are again at an all-time low, driving pension liabilities to an all-time high, but so far this year we’ve seen enough positive asset performance to move funding status in the right direction.”
In February, the projected benefit obligation (PBO) for these pensions reached $1.689 trillion as interest rates slid back to 4.25%, a level last seen at the end of 2011. The overall asset value for these 100 pensions grew from $1.252 trillion to $1.276 trillion.
Looking forward, Milliman estimates if these 100 pensions were to achieve an 8.0% median asset return and if the current discount rate of 4.25% were to be maintained throughout 2012 and 2013, these pensions would narrow the pension funding gap from 75.5% to 79.9% by the end of 2012 and to 85.4% by the end of 2013.
To view the complete study, visit http://ow.ly/4xFIt.