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Another analysis points to pension funding woes

August 12, 2009 by  

Another analysis points to pension funding woes A second study in less than a month has drawn attention to the fact that despite asset gains in July pension plans still experienced a decline.

According to Milliman 100 Pension Funding Index, released by a global consulting and actuarial firm Milliman Inc., pensions experienced asset increases of $31 billion and liability increases of some $46 billion, with a net decrease of $15 billion in funded status.

The index consists of 100 of the nation’s largest defined benefit pension plans.

"We’re losing ground because of declining interest rates," said John Ehrhardt, co-author of the index.

"At this pace, getting back to a mere 80 percent funded status by the end of the year is going to require both favorable interest rate movement and better than 20 percent return on assets," he added.

He furthermore revealed that the cumulative asset return has been a negative 10.85 percent, and the funded status has fallen by $333 billion during the past 12 months.

Milliman has conducted an annual study of the 100 largest defined benefit pension plans sponsored by U.S. public companies for the past nine years. The index projects the funded status for these plans, reflecting the monthly market returns and interest-rate changes, and using the actual reported asset values, liabilities and asset allocations of the companies’ pension plans.

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