Pensions Lose Ground in April, Says Report

The funded status of the 100 largest corporate pension plans fell in April, says a recent report.

Their funded status at the end of April was almost $60 billion lower than it was at the end of March, says the Milliman 100 Pension Funding Index (PFI).

But slippage in their funded status is not unique to last month, Milliman found. Zorast Wadia, Milliman Principal and Consulting Actuary and Charles Clark, Director of Milliman’s Employee Benefits Research Group, write that in the last year the funded status deficit of those 100 plans has grown by $159 billion.

Discount rates, on which Milliman lays the lion’s share of the blame for the increased deficit in funded status, dropped from 3.93% in March to 29.2% in April. They had stood at 3.85% one year ago.

Wadia and Clark write that the funded ratio of the 100 largest corporate pension plans fell from 86.3% to 84%. It attributed that result to discount rates falling below 3%, which it said was “nearing all-time lows.” And they are 7.7 percentage points below their 91.7% rate a year ago.

The deficit of the 100 largest corporate pension plans grew, the report says, from $241 billion March 31 to $299 billion on April 30. Milliman blames a drop in the benchmark corporate bond interest rates used to value pension liabilities for the higher deficit.

Projected benefit obligations also increased, growing by $113 billion to $1.870 trillion. This resulted from a decrease of 47 basis points in the monthly discount rate. That rate had stood at 3.39% in March and at 2.92% in April.

But there was good news, too, Wadia and Clark write. Strong investment gains partially offset the decline in funded status, according to the report. It called the 3.93% investment gain in April “robust” and said that it resulted in the asset values of those 100 pension plans growing by $55 billion to $1.571 trillion.