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Corporate Pension Funded Status Lower over the Quarter, but Marginally Higher for the Year

Even with an increase at the short end of the yield curve, corporate bond discount rates used to value pension liabilities declined to 3.74% from 3.96% at the end of the previous quarter. As a result, the Milliman 100 Pension Funding Index, which is derived from a survey of the 100 largest corporate pension plans, dropped to 83.5% from 84.6%. The survey estimates that investment gains of about 5.21% year-to-date offset the decline in pension liabilities during 2017. The funded status began the year slightly lower at 83.3%.

Citi Pension Liability Index & Milliman 100 Pension Funding Index

If the discount rate stays around the current level and pension assets appreciate at an annual 7.0% expected return (which is the median asset return assumed by plans in the survey), Milliman estimates the funded status could rise to 87.2% by the end of 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.