Funded Status of 100 Largest DB Plans Dropped in July

The mercury may have soared in July, but the funded status of the biggest corporate pension plans fell, says a recent report.

The Milliman 100 Pension Funding Index (PFI), through which Milliman provides information on the 100 largest corporate defined benefit plans, reports that in July their funding levels fell in July, reaching the lowest levels they have hit this year. Milliman says that the funded ratio dropped to 87.9, 0.5 percentage points lower than June’s 88.4%. In dollar figures, that spells a decrease of $11 billion in a month.

There was growth, however — but must of it was not the welcome kind. The collective deficit of the 100 plans increased to $216 billion by the end of July. Their projected benefit obligations were up $15 billion from the previous month, to $1.783 trillion.

Milliman attributes the growth in the funded status deficit to a drop in benchmark corporate bond interest rates that are used to value pension liabilities. And it says that the rise in the projected benefit obligations is due to a decrease of eight basis points in the monthly discount rate; Milliman reports that it dropped from 3.45% at the end of June to 3.37% at the end of July, the third-lowest discount the index has recorded.

There was some welcome growth, however. Milliman reports that the 0.56% investment return in July resulted in the 100 PFI asset value growing by $4 billion, to $1.567 trillion.