Report: Corporate Pension Plans Improve Funding by $20 Billion

Consulting and actuarial firm Milliman Inc. has released its Pension Funding Index composed of the country’s 100 largest pension plans. For the month of February 2012, the plans saw a $20 billion improvement in funding resulting from a $24 billion jump in asset value offsetting a pension benefit obligation increase of $4 billion. The results indicate the continuation of the modest upward trend in pension plans so far in 2012.

For February, the overall asset value for the studied pension plans increased from $1.252 trillion to $1.276 trillion as interest rates fell to 4.25 percent. If the trend continues throughout this year and 2013 at the current interest rate combined with a median asset return of 8 percent, the pension funding gap would narrow to 79.9 percent by the end of 2012 and to 85.4 percent by the close of 2013. John Ehrhardt, co-author of the Pension Funding Study said, “Slowly but steadily, these 100 pensions are chipping away at the pension funding deficit. Interest rates are again at an all-time low, driving pension liabilities to an all-time high, but so far this year we’ve seen enough positive asset performance to move funding status in the right direction.”

The results of the Index are based in actual accounting information disclosed in the preceding fiscal year’s annual reports submitted by the participating companies. The study reflects the impact of market returns and interest rate changes on the status of the pension funds.