Hammered by falling interest rates and a drop in the equities market, the funding levels of pension plans sponsored by large publicly held U.S. employers slid in January, according to a survey released Friday by Milliman Inc.
Defined benefit plans offered by the 100 U.S. employers with the largest pension programs were an average of 91.2% funded in January, down sharply from 95.2% funded in December and 93.9% funded in November, the survey found.
“After a win-win year that combined market growth and cooperative interest rates, we're back to the lose-lose ways where assets fall and liabilities increase,” John Ehrhardt, a Milliman principal and consulting actuary in New York, said in a statement.
January's dip followed a year of significant improvement in plan funding. During 2013, the plans' funded ratio jumped to 95.2% from 77.2%, while plan underfunding dipped to $72.87 billion from $390.70 billion. That roughly $318 billion improvement in plan funding was the biggest one-year gain in the 13 years Milliman has been conducting its analysis, the consulting firm said in its statement.
“Hopefully this is just a speed bump on the way to 100% funded status,” Mr. Ehrhardt added.
At the end of January, surveyed plans had $1.443 trillion in assets and $1.583 trillion in liabilities for a funding shortfall of $140 billion. That compares with a funding deficit of $73 billion in December, when the plans had $1.450 trillion in assets and $1.523 trillion in liabilities.