The funded ratio of the 100 largest U.S. corporate defined benefit pension plans is on the rise, jumping from 108.8 per cent at the end of September to 112.8 per cent at the end of October, according to a new report by consulting firm Milliman Inc.
During the month, the funded status surplus increased to $163 billion with a rise of US$47 billion in assets under management. The report noted an increase in the benchmark corporate bond interest rates used to value pension liabilities led to a decrease in plan liabilities, representing a gain of $51 billion for the month. The market value of plans’ assets fell by $4 billion as a result of a 0.21 per cent investment gain.
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In October, the projected benefit obligation decreased to $1.266 trillion. The change resulted from an increase of 35 basis points in the monthly discount rate to 5.71 per cent for October from 5.36 per cent in September, according to the report, which noted discount rates haven’t been this high since March 2010.