Rate Hikes Drive Up Funded Status of Largest DB Plans

The 100 largest corporate pension plans’ funded status improved during October, says a new report. This comes after NEPC reported similar findings. 

The Milliman 100 Pension Funding Index says that the funded ratio stood at 85.1% by Halloween, a 0.7-percentage point increase from the ratio of 84.4% at the end of September. 

This reflects a variety of positive trends, Milliman reports. For instance, 

• The plans’ deficit declined by $21 billion to $285 billion from the Sept. 30 level of $306 billion. This, they say, is mainly due to pension liability gains that resulted from an increase in the benchmark corporate bond interest rates used to value the liabilities.
• The projected benefit obligation (PBO) at the end of October that stood at $1.915 billion, $40 billion lower than the Sept. 30 level of $1.955 billion. Milliman attributes this improvement to a 14-basis point increase in the monthly discount rate, from September’s 2.57% to 2.71%. 

But not all the news was good. Milliman also says that in October the market value of those plans’ assets dropped by $20 billion and the Milliman 100 PFI asset value decreased to $1.629 trillion. In addition, they report, discount rates fell from 3.08% on Oct. 31, 2019 to 2.71% at the end of October 2020. They also observe that while the funded ratio improved to 85.1% from Sept. 30-Oct. 31, 2020, the ratio stood at 86.8% on Oct. 31, 2019.