Investment returns, higher interest rates boost pension funding
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The funded status of very large pension plans sponsored by public companies rose sharply in February due to investment gains and rising interest rates that lowered the value of plan liabilities, according to a Milliman Inc. survey released Monday.
Defined benefit plans offered by U.S. employers with the 100 largest pension programs were an average of 83.3% funded as of Feb. 28, up from 79.6% as of Jan. 31.
At the end of February, the plans had $1.513 trillion in assets and $1.816 trillion in liabilities, resulting in a funding deficit of $303 billion. That is a decrease of $80 billion compared with the end of January, when the funding shortfall was $383 billion.
Interest “rates continue to define pension funded status, and upward movement in those rates will be necessary to eliminate the funding deficit,” John Ehrhardt, a principal and consulting actuary in Milliman's New York office, said in a statement.
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