A new Milliman analysis indicates that the 100 largest corporate defined benefit pension plans improved by some $45 billion last month. If the numbers and external factors hold steady, Milliman predicts the funded status of those plans would increase through 2013.
The projected benefit obligation, or pension liabilities, of the Milliman 100 pension funding index companies decreased by $30 billion last month, the company reports, from $1.808 billion to $1.778 billion. Milliman says the change came from a moderate increase in the monthly discount rate.
September was the second consecutive month of discount rate bumps after a disappointing March through July.
At the same time, the 100 PFI asset value rose by $15 billion in September, up to $1.325 trillion from $1.310 trillion at the end of August, Milliman reports, buoyed by an investment gain of 1.32%.
As of Sept. 30, the funded ration of the 100 PFI was 74.5%, up from 72.4% a month earlier.
Milliman projects that, if its 100 companies hit a previously estimated 7.8% median asset return and the monthly discount rate holds at 4.08%, the plans would reach a funded ratio of 75.4% by the end of the year and 79.9% by the end of 2013.
With a more optimistic forecast that includes rising interest rates (hitting 4.23% by Dec. 31 and 4.83% by the same date in 2013), funded ratios could reach 78% by New Year’s Eve and go as high as 96% by the end of next year. Pessimistic numbers (3.93% and 3.33%, respectively) would see funded ratios of 73% and 66% by the end of this and next year.
