Abet Chichi2

[DiscoverGold]

PENSION FUNDING INDEX: February’s funded status declines after discount rate plunges below 4%

* March 2017

Milliman 100 PFI funded ratio drops to 81.5%

After five straight months of improvement, the funded status of the 100 largest corporate defined benefit pension plans worsened by $6 billion during February as measured by the Milliman 100 Pension Funding Index (PFI). The decline was fueled by discount rates that plunged below 4%. An 11 basis point drop in the benchmark corporate bond interest rates used to value pension liabilities rendered February’s strong investment performance almost meaningless. As of February 28, the funded status deficit of these plans widened to $322 billion from $316 billion at the end of January. The funded ratio fell to 81.5% down from 81.6% during the same time period.

The market value of assets grew by $19 billion as a result of February’s robust investment return of 1.74%. The Milliman 100 PFI asset value increased to $1.419 trillion from $1.400 trillion at the end of January. By comparison, the 2016 Milliman Pension Funding Study reported that the monthly median expected investment return during 2015 was 0.58% (7.2% annualized). The expected rate of return for 2016 will be updated in the 2017 Milliman Pension Funding Study, which will be released in April.

The projected benefit obligation (PBO), or pension liabilities, increased to $1.741 trillion from $1.716 trillion at the end of January. As mentioned, a decrease of 11 basis points brought interest rates to 3.89% for February from 4.00% for January.

http://www.milliman.com/Solutions/Products/Pension-Funding-Index/

• DiscoverGold

Click on "In reply to", for prior months reports