The nation’s 100 largest defined pension plans experienced a $20 billion improvement in funding during February thanks to a $24 billion improvement in asset value that offset a $4 billion increase in the pension benefit obligation, according to the latest Pension Funding Index from Milliman Inc.
“Slowly but steadily, these 100 pensions are chipping away at the pension funding deficit,” said John Ehrhardt, co-author of the study. “Interest rates are again at an all-time low, driving pension liabilities to an all-time high. But, so far this year, we’ve seen enough positive asset performance to move funding status in the right direction.” Last month, the projected benefit obligation for the pensions reached $1.69 trillion as interest rates slid back to 4.25 percent, a level last seen at the end of 2011. The overall asset value for the 100 pensions grew from $1.25 trillion to $1.28 trillion.

Looking forward, if the pension plans were to achieve an 8 percent median asset return and if the current discount rate of 4.25 percent were to be maintained throughout 2012 and 2013, the plans would narrow the funding gap from 75.5 percent to 79.9 percent by the end of 2012 and to 85.4 percent by the end of 2013.

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