In October, the funded status of the 100 largest corporate defined benefit pension plans increased by $11 billion as measured by the Milliman 100 Pension Funding Index (PFI). The deficit declined to $258 billion primarily due to investment gains. The benchmark corporate bond interest rates used to value pension liabilities were flat in October. As of October 31, the funded ratio settled at 86.1%, up from 85.4% at the end of September.
The market value of assets improved by $13 billion as a result of October’s 1.08% investment gain. The Milliman 100 PFI asset value increased to $1.593 trillion from $1.580 trillion at the end of September. By comparison, the 2019 Milliman Pension Funding Study reported that the monthly median expected investment return during 2018 was 0.53% (6.6% annualized).
The projected benefit obligation increased by $2 billion during October, raising the Milliman 100 PFI value to $1.851 trillion from $1.849 trillion at the end of September. The change resulted from a modest decrease of one basis point in the monthly discount rate to 3.08% for October from 3.09% in September. October’s month end discount rate of 3.08% ranks as the second lowest discount rate recorded in the 19-year history of the Milliman 100 PFI.
Insight
Plan sponsors need to review IRS Notice 2022-33 with scrutiny and check with their plan administrative committees and external business partners to assess how they need to proceed.