March 7, 2012 – In further news that illustrates the strengthening of defined benefit pension plans, Milliman Inc. has released a study showing a $20 billion improvement in pension funding of the top 100 DB funds in the United States.
Milliman, a global consulting and actuarial firm, this week released the results of its latest Pension Funding Index. It found that in February the 100 DB funds increased $24 billion, from improved asset value, but that $4 billion in pension benefit obligations reduced that amount to $20 billion.
The improvement is part of a 2012 trend indicating a modest growth in DB pension funded status.
The increase comes at a time of continued low interest rates and their impact on investments, the report states. John Ehrhardt, co-author of the report, says the February results show a positive growth moving “in the right direction” to fully funded status.
If growth trends continue, and the funds were able to achieve an 8.0 per cent median asset return, together with the current discount rate of 4.25 per cent, the funding gap would move to 79.9 per cent by the end of the year, and 85.4 per cent by the end of 2013.
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