The average funded ratio of the top private sector defined benefit pension plans in the U.S. dipped for the first time since September 2020, according to a new index by actuarial firm Milliman.

The index, which tracks the funded ratio of the 100 top-performing U.S. private sector DB plans, saw the average ratio dip to 97.2 per cent in June, down 1.6 per cent in May. This is the first drop reported by the index since September 2020, which saw a 0.7 per cent dip.

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Despite the dip, the average funded ratio remains significantly higher than it has been at any point between February 2020 and May 2021. In March 2020, the index reported that the average fund ratio had slipped below 82.2 per cent. By the end of the year, the average funded ratio had climbed back to 89 per cent.

According to the authors of the report, the average funded ratio will surpass 100 per cent by the end of 2021 if the top DB plans are able to meet returns expectations of 6.2 per cent. The last time the average funded ratio rose above 100 per cent was in 2007.

Should the DB pensions reach Milliman’s return expectations for 2022, the funded ratio would rise to almost 104 per cent. According to its most optimistic models, the funded ratio could go as high as 108 per cent by the end of 2021 and 125 per cent by the end of 2022. Its most pessimistic models indicated the funded ratio could dip to 94 per cent in 2021 and 85 per cent by the end of 2022.

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