2003 Pension Plan Returns Exceed Hopes: Milliman

NU Online News Service, April 7, 2004, 2:45 p.m. – The average actual return on assets for 100 of the nation’s largest defined benefit pension plans was 19.6% in 2003, more than twice the expected return, a survey by Milliman found.[@@]

Milliman, a consulting firm in Seattle, also found, however, that the funded status of the biggest defined benefit plans improved only slightly, because assets gains were largely offset by liability increases due to lower interest rates.

“By any measure, this was a banner year for DB asset returns, but with continued declines in interest rates, the plans’ funded status have not recovered significantly,” says John Ehrhardt, Milliman consulting actuary and principal. “We have only regained 12% of the surplus assets lost over the past 3 years, so plan sponsors will have to continue to focus on their asset allocation and funding strategies.”

The total pension deficit for the 100 plans fell by $43 billion, regaining 12% of the $371 billion in surplus assets lost over the previous three years, says Milliman. Out of the 100 companies, 19 had a surplus in 2003, with assets exceeding pension liabilities, compared to 12 the previous year. This was still much fewer than the 40 companies that reported surplus assets at the end of 2001 and the 80 in a surplus position at the end of 2000.