According to the latest update to the Milliman 100 Pension Funding Index, owned by Milliman, Inc., a consulting and actuarial firm, pensions saw a 141-basis-point drop in interest rates in December, resulting in $130 billion in liability losses to end of 2008.
Milliman 100 Pension Funding Index consists of 100 of the nation’s defined benefit pension plans. Accounting for investment gains of $16 billion, pensions lost $114 billion in December. After starting the year with a 104.9% funded ratio, the 100 largest pensions ended 2008 at 77.2%.
The cumulative asset return for the year ended at -21%, a loss of $348 billion. These results are expected to produce an estimated increase of $65 billion in pension expense for 2009.
“The sting is in the tail,” says John Ehrhardt, co-author of the Milliman 100 Pension Funding Index. “The asset losses in September and October were the biggest we’ve seen, but in terms of funded status, the months of November and December were more crippling for pensions due to massive liability losses. The 100 largest pensions lost a quarter of their funded status last year.”
L.D.