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Pension Funding Index: Funded status rises in June by $23 billion
By: Milliman | July, 2018

The Milliman 100 PFI funded ratio increases to 92.8% as discount rates climb above 4% to reach a two-year high

The funded status of the 100 largest corporate defined benefit pension plans increased by $23 billion during June as measured by the Milliman 100 Pension Funding Index (PFI). The deficit fell to $118 billion from $141 billion at the end of May due to an increase in the benchmark corporate bond interest rates used to value pension liabilities. June’s funded status improvement would have been even higher were it not for offsetting poor investment returns. As of June 30, the funded ratio climbed to 92.8%, up from 91.6% at the end of May. The mid-year funded ratio is well above the 87.6% at the start of 2018.

June’s -0.09% investment return pushed assets down to $1.526 trillion from $1.531 trillion at the end of May. By comparison, the 2018 Milliman Pension Funding Study reported that the monthly median expected investment return during 2017 was 0.55% (6.8% annualized).

The projected benefit obligation (PBO) decreased by $28 billion during June, lowering the Milliman 100 PFI value to $1.644 trillion. The change resulted from an increase of 13 basis points in the monthly discount rate; the rate reached 4.12% for June, from 3.99% in May. June’s discount rate marks the highest rate since 4.14% observed at the end of January 2016.

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