Top Corporate Pensions Shrug Off May Funding Dip

Interest rates stirring mixed year-end, 2019 outlooks.

A $2 billion drop in funded status during May didn’t stop the 100 largest US corporate pension plans from keeping the aggregate ratios above 90%, Milliman reports.

“Sometimes no news is good news for corporate pensions,” said Zorast Wadia, co-author of the Milliman 100 Pension Funding Index, the firm’s chart of the 100 largest US companies.

Last month, companies in the index gained 0.73%, which Wadia said “exceeded monthly expectations.” The monthly discount rate decreased four points, which was offset by the returns.

The pension deficit for the plans in the Milliman index has shrunk by $116 billion in the past year.

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Rising interest rates caused for mixed forecasts from Milliman, as economists have predicted a downturn in 2019.

On the positive side, the funded ratio could hit 100% at the end of the year, potentially reaching 116% funded by the end of 2019. This would be possible should interest rates reach 4.24% by December and 5.03% at the end of 2019, coupled with 10% returns or higher.

On the negative end, funded status for the top 100 plans would drop to 87% at the end of 2018, and 81% at the end of 2019. For that to happen, rates would have to reach 3.64% later this year, and 3.03% in December 2019, with returns of 2.8%.

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