The funded status of the 100 largest U.S. corporate pension plans was 94.5% at the end of the third quarter. The liability discount rate rose to 4.18%, which caused the funded status to increase from 92.7% at the end of the previous quarter, according to the October 2018 Milliman 100 Pension Funding Index survey. The discount rate ended the previous quarter at 4.12%.
Pension assets increased by about 1.1%, and liabilities declined by about 0.88% over the end of the previous quarter.
At the beginning of 2018, the survey funded status was 87.6% and the liability discount rate was 3.53%. Over the first three quarters of the year, higher interest rates have been the primary contributor to the improvement in pension funding; asset returns were down about 0.99% since the start of the year.
Looking forward, according to Milliman, if corporations were to achieve their expected median return assumption of 6.8%, and current interest rates hold, funded status could improve to 99.2% by the end of 2019. This analysis assumes contributions also increase slightly in 2019 over 2018.
*The Milliman Pension Funding Index is based on actual pension plan accounting information for the 100 largest defined benefit pension plans sponsored by U.S. public companies. The index is based on a ratio of the market value of assets compared to the projected benefit obligation (PBO), as a measure of the pension liabilities.