The economy may have slowly crept back up last year (as ABC News writes here; see also the Jan. 6 economic report from the Bureau of Labor Statistics), but that doesn’t mean that everything is rebounding.
A new analysis by actuarial firm Milliman shows that the funding deficit for 100 of the largest pension plans reached a record $464 billion.
That’s $464 billion in the red, folks.
Milliman has studied the 100 largest defined benefit (DB) pension plans sponsored by U.S. companies for the past 11 years, publishing monthly analyses. The company’s December 2011 analysis revealed this dispiriting figure. This means the top 100 DB plans only have money to pay 72.4 percent of the retirement plans for its plan participants. The $236.4 billion deficit incurred during 2011 more than doubled the existing $228.0 billion pension funding deficit left over from 2010.
“Historically low interest rates were the dominant factor in the $236.4 billion deficit increase during 2011,” the study stated. “While investment returns produced an anemic $12.3 billion gain, pension liabilities increased by $248.7 billion.”
Other numbers, according to the Milliman study:
The historical low funding ratio was 70.5 percent, set in May 2003.
In 2011, the cumulative investment return was 3.0 percent, while the cumulative liability return was 22.1 percent.
The high funding ration during 2011 came in March, with 87.7 percent of DB plans funded.
Looking ahead, Milliman stated that “any hope for economic resuscitation for 2012 and beyond relies solely on the performance of assets as long as we remain in this historically low interest rate environment.” If forecasted activity matches performance in 2012, Milliman predicts the funded status of these 100 funds to increase in the coming year.
Good news for DB plan participants looking ahead. The government agency that protects pension benefits for participants in underfunded plans, the Pension Benefit Guaranty Corp. (PBGC) announced in November that it also is underfunded – to the tune of $26 billion. This deficit is the largest in the organization’s 37-year history.