Corporate pensions fell further into the red in December, according to a new report.
Global consulting and actuarial firm Milliman discloses this finding in a December update on Pension Funding Index. The PFI consists of 100 of the nation's largest defined benefit pension plans.
Milliman discloses that corporate defined benefit plans experienced a $19 billion increase in pension liabilities and a $3 billion decrease in asset value, resulting in a $22 billion increase in the pension funded status deficit and a funded ratio of 83.6 percent. For the year, despite market returns of $81 billion, pensions suffered a $105 billion increase in the pension funded status deficit. Fueling the rise was a $186 billion increase in liabilities, as interest rates fell to a historic low at year-end.
"What a difference a year makes," says John Ehrhardt, co-author of the Milliman 100 Pension Funding Index. "Last year at this time we were celebrating a historic rally for these pensions, thanks to — surprise surprise — cooperative interest rates. This year it's the opposite story, with interest rates falling to 3.80 percent, the lowest rate we've ever seen in the 14-year history of this study. With rates this low, the liability increase for these pensions outstripped strong asset performance by more than $100 billion."
