Average funding levels of largest U.S. pension plans drop: Milliman

The funding levels of pension plans sponsored by large publicly held U.S. employers dropped in August to their lowest levels of the year, Milliman Inc. said in an analysis.

Defined benefit plans offered by the 100 U.S. employers with the largest pension programs were on average 79.3% funded as of Aug. 31. That's down from an average funding level of 83% at the end of July and 84.1% at the end of last year, though still significantly higher than the 70.7% average funding level in August 2010, according to the Seattle-based consulting and actuarial firm.

“It's been another rough summer for these 100 pensions,” said John Ehrhardt, a principal and consulting actuary in Milliman's New York office, in a statement. “With volatility on the asset side continuing, and no sign of interest rates rising anytime soon, we may be in for more turbulent times,” he added.

The market value of assets held by the pension plans slipped to $1.206 trillion in August from $1.236 trillion in July, while plan liabilities rose to $1.521 trillion from $1.488 trillion due primarily to a decline in corporate bond interest rates used to value pension liabilities.

The declines in the equities market and corporate bond interest rates used to value pension liabilities contributed to the sharp drop in plan funding levels, Milliman said in the study.