US Corporate Pension Funding Ratio Rises to 87.1% in 2018
The funded ratio of the 100 largest US corporate pension plans rose to 87.1% in 2018 from 85.8% at the end of 2017, despite investment losses of 2.8%—the worst asset performance since 2008, according to consulting firm Milliman.
“This was the first time in our study’s history that we had a negative asset return and yet corporate pension funding improved,” Zorast Wadia, co-author of Milliman’s Pension Funding Study (PFS), said in a release.
The investment losses reduced plan assets by $43 billion, compared to the expectation that investment gains would add at least $97 billion, which was based on the companies’ long-term investment return assumptions. However, the funded status improved due to a combination of large contributions and the discount rates plan sponsors used to value pension liabilities.
The average discount rate increased by 52 basis points to 4.01% from 3.49%, which was the second-largest one-year increase since Milliman began its annual study 19 years ago. Meanwhile, the pension benefit obligation (PBO) of the 100 largest corporate pension plans declined to $1.66 trillion, down from last year’s record high of $1.8 trillion.
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