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Milliman: Investment Returns Plump Up Pension Plans

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Solid stock market performance and rising interest rates helped large employers improve the funding status of defined benefit pension plans in 2006.

Researchers at Milliman, Seattle, have presented that conclusion in a review of the performance of 100 large U.S. defined benefit pension plans.

The average annual return on the pension assets of the plans reviewed was 12.8%, which exceeded expected returns by almost 4.5 percentage points, and the typical funded status was about 100%, the Milliman researchers report.

The average return has been 13.9% for the past 4 years, but, because of declines in 2000 and 2001, the average return since 1999 has been only 5.7%, the researchers say.

The pension plans studied have $1.3 trillion in assets.

Total pension expense for the plans increased $1.5 billion in 2006, to more than $26 billion, but it probably will decrease this year, the Milliman researchers predict.