Pension liabilities rose in the second quarter, as the pension liability discount rate decreased 38 basis points from the previous quarter to 2.74%. The Milliman 100 Pension Funding Index Survey* reported the estimated pension funding for the 100 largest corporate defined benefit plans decreased to 97.2% from a revised 98.2% at the end of the first quarter of 2021.
Partially offsetting some of the increase in the discount rate, pension assets improved 3.9% over the quarter, as domestic equity markets continued to reach new highs and the U.S. recovery exceeded expectations.
Over the past year, pension plans have seen a dramatic improvement in their funded status. The Index sat at 84.6% a year ago at the end of June 2020.
Milliman noted that if interest rates were to hold around current levels and the plans in the survey achieve at least 6.2% expected return for the entire year, the Pension Funding Index could rise to 98.7% by the end of 2021.
*Source: Milliman Pension Funding Index Survey, July 12, 2021, and Society of Actuaries.