The funded status of the 100 largest corporate defined benefit pension plans improved by $14 billion during April, as measured by the Milliman 100 Pension Funding Index (PFI). An increase in the benchmark corporate bond interest rates used to value pension liabilities led to a $60 billion decrease in these liabilities for the month. As of April 30, the PFI funded ratio rose to 103.4% from 102.2% at the end of March, marking four consecutive months of funded status improvements.
Meanwhile, the market value of PFI plan assets fell by $46 billion in April because of the month’s -3.00% investment losses. The Milliman 100 PFI asset value decreased to $1.278 trillion as of April 30, 2024, from $1.324 trillion as of March 31, 2024. By comparison, the 2024 Milliman Pension Funding Study reported that the monthly expected investment return for FY2023 was 0.52% (6.4% annualized). The full results of the annual 2024 study can be found at www.milliman.com/pfs.
Highlights
| $ BILLION | FUNDED PERCENTAGE | |||
|---|---|---|---|---|
| MV | PBO | FUNDED STATUS | ||
| March | 1,324 | 1,295 | 29 | 102.2% |
| April | 1,278 | 1,235 | 42 | 103.4% |
| Monthly change | (46) | (60) | +14 | 1.2% |
| YTD Change | (50) | (99) | +49 | 3.9% |
Note: Numbers may not add up precisely due to rounding
The Milliman 100 PFI projected benefit obligation decreased by $60 billion during April, to $1.235 trillion. The change resulted from a 44-basis-point increase in the monthly discount rate, to 5.68% for April from 5.24% in March.
Over the last 12 months (May 2023 – April 2024), the cumulative asset return for these pensions has been a paltry 2.79%, yet the Milliman 100 PFI funded status position has improved by $60 billion during that time. The funded status increase is primarily due to discount rates, which experienced a net increase of 76 basis points over the past year, rising from 4.92% as of April 30, 2023, to 5.68% as of April 30, 2024. During that time, the funded ratio of the Milliman 100 companies improved from 98.7% to 103.4%.
Figure 1: Milliman 100 Pension Funding Index — Pension surplus/deficit
PFI reconciliation
This May PFI publication reflects the annual update of the Milliman 100 companies and their 2023 financial figures included in the Milliman 2024 Pension Funding Study.1 The revised December 31, 2023, pension obligation was $3 billion lower and the actual PFI asset value was $38 billion lower than we previously projected after accounting for actual investment gains lower than projected, lump-sum window settlements, and pension risk transfers (de-risking activities) as of year-end 2023, as well as updates to account for new and exiting companies making up the Milliman 100.
The net adjustments introduced by the Milliman 2023 Pension Funding Study led to a funded status decline of $35 billion and a corresponding decrease to the funded ratio, bringing it from 102.2% to 99.5% as of December 31, 2023.
Figure 2: Milliman 100 Pension Funding Index — Pension funded ratio
2024-2025 projections
If the Milliman 100 PFI plans were to achieve the expected 6.4% median asset return (as per the 2023 PFS), and if the current discount rate of 5.68% remains unchanged throughout 2024 and 2025, we forecast that the funded status of the surveyed plans would increase. The pension surplus is projected to be $49 billion (funded ratio of 104.0%) by the end of 2024 and $59 billion (funded ratio of 104.8%) by the end of 2025. For purposes of this forecast, we have assumed 2024 and 2025 aggregate annual contributions of $15 billion.
Under an optimistic forecast with rising interest rates (reaching 6.08% by the end of 2024 and 6.68% by the end of 2025) and annual asset returns of 10.4%, the funded ratio is projected to climb to 111% by the end of 2024 and 124% by the end of 2025. Under a pessimistic forecast with similar interest rate and asset movements (5.28% discount rate at the end of 2024 and 4.68% by the end of 2025 and 2.4% annual asset returns), the funded ratio is projected to decline to 97% by the end of 2024 and 88% by the end of 2025.
Milliman 100 Pension Funding Index - May 2024 (all dollar amounts in millions)
Pension asset and liability returns
About the Milliman 100 monthly Pension Funding Index
For the past 24 years, Milliman has conducted an annual study of the 100 largest defined benefit pension plans sponsored by U.S. public companies. The Milliman 100 Pension Funding Index projects the funded status for pension plans included in our study, reflecting the impact of market returns and interest rate changes on pension funded status, utilizing the actual reported asset values, liabilities, and asset allocations of the companies’ pension plans.
The results of the Milliman 100 Pension Funding Index were based on the actual pension plan accounting information disclosed in the footnotes to the companies’ annual reports for the 2023 fiscal year and for previous fiscal years. This pension plan accounting disclosure information was summarized as part of the Milliman 2024 Pension Funding Study, which was published on April 23, 2024. In addition to providing the financial information on the funded status of U.S. qualified pension plans, the footnotes may also include figures for the companies’ nonqualified and foreign plans, both of which are often unfunded or subject to different funding standards than those for U.S. qualified pension plans. They do not represent the funded status of the companies’ U.S. qualified pension plans under ERISA.
1 There are also differences in methodology between the results reported in our annual study versus our projected monthly index, so a match is not expected. The annual PFS funded ratio is aggregating plans with different fiscal year ending dates and different discount rates, whereas the monthly PFI makes normalizing adjustments to approximate the values of all 100 companies as of the same measurement date using the same average discount rate.