Corporate Pension Funded Status Improves by $25bn in October

Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Pension Funding Index, which analyzes the 100 largest U.S. corporate pension plans. In October, these pension plans experienced a $25bn increase in funded status based on a $33bn increase in asset values and an $8bn increase in pension liabilities. The funded status for these pensions increased from 81.7% to 83.3%.

“October was a great month for these pensions, but it may be too little too late as far as 2015 is concerned,” said John Ehrhardt, co-author of the Milliman 100 Pension Funding Index. “Overall funded status has improved by only 1.8% this year, and this would be worse if it weren’t for interest rates inching in the right direction to reduce pension liabilities.”

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.26% by the end of 2015 and 4.86% by the end of 2016) and asset gains (11.3% annual returns), the funded ratio would climb to 85% by the end of 2015 and 98% by the end of 2016. Under a pessimistic forecast (4.06% discount rate at the end of 2015 and 3.46% by the end of 2016 and 3.3% annual returns), the funded ratio would decline to 82% by the end of 2015 and 75% by the end of 2016.

Milliman is among the world’s largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe.