Large employer pension plan funding levels drop significantly in July: Milliman

The funding levels of pension plans sponsored by large publicly held U.S. employers dropped significantly in July, Milliman Inc. said in an analysis released Tuesday.

Defined benefit plans offered by the 100 U.S. employers with the largest pension programs were on average 83% funded as of July 31. That’s down from an average funding level of 87% at the end of June, and 84.1% at the end of last year, but up from 76.2% in July 2010, according to the Seattle-based consulting and actuarial firm.

The market value of assets held by the plans in July slipped to $1.234 trillion from $1.240 trillion in June, while plan liabilities rose by $62 billion to $1.488 trillion, due primarily to a decline in corporate bond interest rates used to value pension liabilities. Poor equity market results also contributed to the drop in plans’ funded status, Milliman said.

The analysis does not cover the first six trading days of August, when the equities market fell sharply.

“July was a brutal month for” pension plans, John Ehrhardt, a principal and consulting actuary in Milliman’s New York office, said in a statement.

“Unfortunately, it looks like we may be in for more bad news, with August off to a miserable start. Through August 8, we estimate that the funded status deficit has grown by an additional $97 billion,” he said.