In September the funded status of the 100 largest corporate defined benefit pension plans improved by $32 billion, as measured by the Milliman 100 Pension Funding Index. The deficit dropped to $132 billion from $164 billion at the end of August, primarily due to a robust investment gain of more than 2% during September. The PFI funded ratio increased to 91.4% from 89.3% at the end of August. Analysts report that this marked the fourth consecutive quarter of improvement in funded status.

“It looks like the good news surrounding pension funded status has returned, at least temporarily, after a slight reversal of direction in August,” said John Ehrhardt, co-author of the PFI at the global consulting and actuarial firm. “The market value of assets increased by $27 billion as a result of September’s investment gain of 2.10%,” Ehrhardt noted.

Under an optimistic forecast with rising interest rates (reaching 4.95% by the end of 2013 and 5.55% by the end of 2014) and asset gains (11.5% annual returns), the funded ratio would climb to 95% by the end of 2013 and 113% by the end of 2014. Under a pessimistic forecast with similar interest rate and asset movements (4.65% discount rate at the end of 2013 and 4.05% by the end of 2014 and 3.5% annual returns), the funded ratio would decline to 90% by the end of 2013 and 84% by the end of 2014.

To view the complete study, go to http://us.milliman.com/pfi/. To receive regular updates of Milliman’s pension funding analysis, visit pensionfunding@milliman.com.

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