Corporate Pensions Enjoy Positive Swing in September

(October 12, 2010) — US corporate pension liabilities dropped by $29 billion in September, leading to a $67 billion increase in the funded status of the top 100 schemes, according to research by Milliman.

The Milliman 100 Pension Funding Index found in its latest research that pension funds saw assets increase by $38 billion in September, while overall, the pension funding deficit decreased to $393 billion at the end of the month. The group said that if, for the remainder of the year, the companies in the study were to achieve their 8.1% median asset return expected for their pension portfolios for 2010 and the current discount rate of 4.93% were maintained, the funded status of the surveyed plans would increase, with a projected pension deficit of $390 billion and a funded ratio of 74.2%.

The good news follows a lackluster performance in August, when pension funded status fell to its lowest level in the 10-year history of the Milliman 100 Pension Funding Index, which reports on the nation’s 100 largest defined benefit schemes. At the end of August, the pension funding deficit was $460 billion, down $108 billion from the previous month. Approximately $17 billion of the loss came from asset declines, and an increase in liabilities pushed funding levels to decline even further.

“In September the volatility went our way, which was good to see after last month’s all-time low,” said John Ehrhardt, co-author of the index. “This month was a positive step toward full funding, but we have a long climb ahead of us. “Just to put this in perspective, it would take 17 consecutive, similarly positive months to get back to 100% funding. We all know that won’t happen in these volatile times, but a positive step is a positive step.”