Funded Status of Large DB Plans Chills Out in July

It may have been hot outdoors, but the AC was blasting on the funded status of the 100 largest private-sector pension plans in July, according to a recent report. 

According to Milliman, assets for those DB plans grew in July—by more than $13 million—but that was overwhelmed by an even greater increase in liabilities, with a resulting deficit of $80 billion. This continues a trend that began as the second quarter drew to a close, they report. 

Milliman says that an investment return of 1.10% was the source of the growth in assets in July, and attributes the increase in liabilities to a drop in the benchmark corporate bond interest rates used to value liabilities. 

The projected benefit obligation grew in July as well, Milliman says, which it says is due to a 15-basis point decrease in the monthly discount rate. 

Funded Ratio

Milliman says that by July 31 the funded ratio of the 100 biggest corporate pension plans fell from June’s 97.1%, but still stood at 95.8%. 

Big Picture Health

Despite the July results, the bigger picture for the year is still positive. Milliman notes that the funded ratio by the end of July is still more than 5 percentage points higher than the funded ratio on New Year’s Day, which stood at 90.3%. And the July 2021 funded ratio of 95.8% is much higher than that of the same month one year ago.