Funded Status of Large DB Plans Down in Q2

The funded status of the 100 largest private-sector pension plans fell in the second quarter, according to a recent report. 

According to Milliman, much of that was fueled by a sharp drop in June, a reversal of the trend of the previous months, Milliman says that from October 2020 to May 2021, funded status improved by approximately $250 billion for those plans, but the 1.6 percentage point drop in June erased 12% of those gains. Milliman reports that while assets grew for those 100 pension plans in June, that growth was outstripped by that of liabilities—yielding a deficit of $52 billion.
 

 
Milliman said that the value of assets grew by $20 billion from $1.806 trillion at the end of May to $1.826 trillion at the end of June. They attribute that growth to a “solid” investment return of 1.46%. They attribute the increased liabilities to a decrease in the benchmark corporate bond interest rates used in determining the value of those liabilities. 

Silver Lining

Despite the steep drop in funded status in June and consequent decline from the first to the second quarter, there still is some good news for 2021 overall, so far. Milliman notes that even with the drop, the funded ratio is still almost 7 percentage points higher than it was at the start of 2021: In June it stood at 97.2%, whereas in January the funded ratio was 90.3%. And the June 2021 level exceeds that of the same month one year ago by even more.