According
to research conducted by Milliman, Inc. analysts, pension funded ratio
approaches 90% in July due to robust investment performance. Corporate pension funded
status improved by $23 billion in July and by a stunning $388 billion over the
last 12 months, resulting in lowest pension deficit since June of 2011.
Milliman released the
results of its latest Pension Funding Index, which surveys 100 of the nation's
largest defined benefit pension plans. In July, these plans enjoyed a $26
billion increase in asset value and a $2 billion increase in pension
liabilities. The pension funding deficit dropped from $182 billion at the end
of June to $158 billion at the end of July.
Market performance over the
last year provided the boost to the asset value of the plans. In fact, there
have been gains in nine months out of the last twelve. Year-to-date, the projected
benefit obligation has been reduced by $172 billion, resulting in a $233
billion improvement in the funded status of these plans. This resulted in a funded
ratio of 89.7% in July.
According to the analysis, if
the Milliman 100 pension plans were to achieve the expected 7.5% median asset
return for their pension plan portfolios, and if the current discount rate of
4.73% were maintained, funded status would continue to improve. By the end of
2013, funded status deficit would narrow to $128 billion, resulting in a 91.7%
funded ratio. If this continues through the end of 2014, the deficit would drop
to and $44 billion, with a 97.2% funded ratio.