Milliman 100 Pension Funding Index Pension Surplus/Deficit, March 2000-September 2011

In October, America’s 100 largest defined benefit pension plans experienced a $44 billion investment gain and a $2 billion increase in pension liabilities, according to a new study.

Milliman, Inc., a Seattle-based global consulting and actuarial firm, released this finding in a summary of results from the October edition of its Pension Funding Index, which consists of 100 of the nation’s largest defined benefit pension plans. The monthly index projects the funded status for pension plans included in the Milliman Pension Funding Study, reflecting the effect of market returns on plan assets and the impact of interest-rate changes on plan liabilities.

The $42 billion improvement in funded status, the survey says, comes in the wake of a $254 billion increase in the pension funding deficit in the third quarter of calendar year 2011, which was the second worst financial quarter on record. Only once in the history of the Milliman study has pension performance been worse: during the historic fourth quarter of calendar year 2008.

Milliman attributes the third quarter improvement to investment gains. As of October 31, the funded ratio rose to 75.4% from 72.8% at the end of September. The funded status deficit decreased from $440 billion to $398 billion.

October was the first month showing an increase in pension funded status since June and the best month since January. Milliman says this was favorable news in light of the $254 billion decline in the period from June 30, when the Milliman 100 PFI showed the most significant three-month deficit increase since the start of the financial crisis during the last quarter of 2008.

The survey’s projected benefit obligation (PBO), or pension liabilities, increased by $2 billion during October, raising the Milliman 100 PFI value to $1.616 trillion from $1.614 trillion at the end of September 2011. The change resulted from a meager decrease of 1 basis point in the monthly discount rate to 4.53% for October from 4.54% for September 2011.