The 2021 edition of the Milliman Corporate Pension
Funding Study (PFS) is our 21st annual analysis
of the financial disclosures of the 100 U.S. public
companies sponsoring the largest defined benefit
(DB) pension plans. These 100 companies are ranked
highest to lowest by the value of their pension assets
that are reported to the public as of the end of fiscal
year 2020, to shareholders, and to the U.S. federal
agencies that have an interest in such disclosures.
A year prior, in our 2020 PFS, we began this report with,
“Looking back to 2019 in April 2020 may seem irrelevant
since we are dealing with the global pandemic’s horror and
destruction to the health, jobs, businesses and financial assets
of everyone.” As we open the 2021 PFS, we are even more aware
of the magnitude of the destruction and efforts to overcome the
human and financial toll from the pandemic. Recently, Congress
passed and President Biden signed the American Rescue Plan
Act of 2021 (ARPA-21). In doing so, the single-employer defined
benefit plans that comprise our PFS were offered additional
contribution relief that had begun with the Coronavirus Aid,
Relief, and Economic Security (CARES) Act in March 2020.
This relief comes in the form of a reduction in the minimum
required contributions by artificially increasing the discount
rates for the actuarial calculations and allowing any pension
deficit to be amortized over 15 years instead of seven years. It is
unknown at this time how many of the Milliman 100 companies
will elect to implement some of the early-adoption changes that
would reduce their minimum required cash contributions.
Despite a decline of 67 basis points in discount rates, the
private single-employer defined benefit plans of the Milliman
100 companies continued to make funded ratio improvements
in 2020 due to their greater-than-expected investment gains
of 13.4%. The year-end 2020 funded ratio for the Milliman
100 companies settled at 88.4%, a slight improvement from
the year-end 2019 funded ratio of 87.5%. This improvement is
remarkable given that we estimate the funded ratio had fallen
to approximately 81% at the end of July.
Nineteen plans had a funded ratio of at least 100% compared to
14 plans from the 2020 Milliman PFS. However, due to nearly
matching growth in both assets (9%) and liabilities (8%), the
funding deficit grew by $919 million, ending the year at $232 billion.
FIGURE 1: DISTRIBUTION BY FUNDED RATIO
Contributions of $34.6 billion in 2020 were slightly higher than
2019 contributions of $33.6 billion. These last two years pale in
comparison to 2017 and 2018, when plan sponsor contributions
hit record highs of $61.8 billion and $59.0 billion, respectively.
Ten employers contributed at least $1 billion in 2020, down
from 13 in 2019. The largest contribution in 2020 was by General
Electric ($3.3 billion). In 2019, the highest was United Parcel
Service, Inc.’s $2.1 billion.
Pension funds saw a second consecutive year of better-than-expected
investment gains, returning 13.4% in 2020 compared to
17.2% in 2019. The 2020 gains increased plan assets by $212 billion
compared to the expectation that investments would increase by
only $95 billion, based on the companies’ long-term investment
return assumptions. The Milliman 100 plans’ assets increased to
an all-time high of $1.77 trillion in 2020 from $1.62 trillion in 2019.
It is worth noting that, over the 12-year period from 2009 to 2020, there were only three years of adverse investment performance
where returns were less than the expected return assumption. In
2011, the average return was slightly less than expected, in 2015,
the average return was near zero, and in 2018, the average return
was negative.
However, this record asset level was offset by soaring liability
values as the average discount rate plummeted 67 basis points
in 2020, from 3.08% to 2.41%. In 2019 the average discount rate
decreased by a record setting 91 basis points to the lowest
levels seen in the study. The additional 67 basis-point drop
in 2020 sets a new record low as discount rates fell below 3%
for the first time in our study. The pension benefit obligation
(PBO) of the Milliman 100 plans increased to a new all-time
high of $2.00 trillion from $1.86 trillion.
Pension expense (the charge to the income statement under
Accounting Standards Codification Subtopic 715) decreased
to $17.7 billion in fiscal year (FY) 2020 from $26.1 billion in
FY2019. After the anomaly in FY2019, this returned to the
trend of decreasing expense charges since the all-time high
of $56.3 billion in FY2012.
There was a modest decline in life expectancy assumptions;
participants and pensioners will not live as long as previously
assumed based on use of the mortality tables published
by the Society of Actuaries. The change in life expectancy
assumptions generally reduced the actuarial present value of
the PBO. It is not common, nor required, that a plan sponsor
discuss the changes in PBO due to the change in life expectancy
in the Form 10-K. We are aware that some of the Milliman 100
plans experienced a PBO decrease of approximately 1% due to
the lower life expectancy assumptions.
During FY2020, pension settlements or pension risk transfer
(PRT) programs continued to be employed as financial cost
management tools by plan sponsors. Among the Milliman 100
pension plans, settlement payouts totaled an estimated $15.8
billion in FY2020; up from the $13.5 billion in FY2019. General
Motors had the most settlements in 2020 totaling $2.6 billion
(most of which was a $1.5 billion annuity purchase for their
Canadian plan).
Like the Milliman 100 pension plans, the Pension Benefit
Guaranty Corporation (PBGC) reported a large funded status
improvement for the corporate pension plans under its custody
in the federal fiscal year ending September 30, 2020. The PBGC
reported a 112% funded ratio for the plans that terminated
(when the sponsoring employer filed for Chapter 11 insolvency)
and were sent to the PBGC as the receiving custodian. We note
that plans the PBGC expects to terminate are also included.
The PBGC funded ratio increased from 107% reported
at September 30, 2019. This change was driven by a large
increase in assets caused by premiums collected and higherthan-
expected investment gains (which exceeded the increase
in liability due to the decline in interest rates). Despite the
increases in the PBGC premium rates, the decreases in funding
deficits in 2019 (as measured on the PBGC’s basis) caused the
PBGC’s total premium income to decrease by 11% in FY2020 to
$5.7 billion, down from $6.4 billion in FY2019.
Two companies were eliminated in 2020 from our study due to
reductions in the market values of pension plan assets.
- Arconic Inc. split into Howmet Aerospace Inc. and Acronic
Corporation, each of which took a portion of the pension
assets and liabilities, resulting in neither company making our
list this year.
- The asset value of the pension plan(s) of United Airlines
Holdings (previously named United Continental Holdings)
declined enough to drop below the 100th largest company.
Three companies are new to the 2021 Milliman Pension Funding
Study (some of which returned after falling off in prior years):
Parker-Hannifin Corporation, Target, and Hartford Financial
Services Group, Inc.
Also of note:
- In 2020, Raytheon Company and United Technologies
Corporation (UTC) merged to form Raytheon Technologies
Corporation. As both companies were on our list in 2019
(Raytheon at rank 20 and UTC at rank 8), this merger pushes
Raytheon Technologies up to rank 6 on our list.
- After the end of Harris Corporation’s 2019 fiscal year, they
merged with L3 Technologies to form L3Harris Technologies.
The addition of L3’s pension assets pushed L3Harris from rank
90 on our list in 2019 to rank 58 in 2020.
- In 2020, AbbVie Inc. acquired Allergan Plc. The addition of
Allergan’s pension assets pushed AbbVie Inc. from rank 65 on
our list last year to rank 57 this year.
- CenturyLink changed their name to Lumen Technologies.
FIGURE 2: HIGHLIGHTS (IN $ BILLIONS)
Note: Numbers may not add up precisely due to rounding
In addition to defined benefit pension plans, the PFS tracks
the actuarial obligations of postretirement healthcare benefits.
Accumulated postretirement benefit obligations (APBOs) have
been trending downward for the past couple of decades as plan
sponsors divest their other postemployment benefits (OPEB)
liabilities. In FY2020, this trend was offset by the large decrease
in discount rates resulting in APBOs increasing slightly by $0.6
billion to $170.5 billion from their FY2019 level of $169.9 billion.
The investment return on the pension assets was 13.4% when
the expectation was a FY2020 investment return of 6.2%. Based
on this, we estimate that there was a net investment gain of $117
billion. This is the second largest gain we’ve seen in the history
of the study (only topped by the FY2019 gain of $148 billion).
Since 2008, pension plan asset allocations to equities decreased
to about 31.9%, from about 43.8%, while fixed income allocation
has increased to about 50.2% from about 41.8%.
Detailed comments and illustrations follow in the remainder of
the 2021 PFS. Various tables with historical values can be found
in the Appendix.
For the second consecutive year,
equities flaunt their long duration
qualities and keep pace with surging
pension liabilities
For calendar fiscal year plans, the average discount rate fell
by 70 basis points during 2020. We estimate that their pension
liabilities increased approximately 13% on an economic
basis (due to the passage of time and changes to discount
rates, ignoring benefit payments and accruals). Plans with
significant allocations to fixed income as part of a liabilitydriven
investment (LDI) strategy typically have allocations
to long-duration high-quality bonds. During 2020 these bonds
earned returns of 13% or more—closely tracking the increase
in pension liabilities. Surprisingly, equities, especially U.S.
equities, performed even better and also outperformed pension
liabilities. Core fixed income produced strong returns but not
enough to keep up with the liabilities of most plans.
Rates of return earned in 2020 for the 85 companies sponsoring
pension plans with calendar fiscal years ranged from 9.2%
to 25.6%, with an average of 13.8%. Returns mostly fell in the
10.0% to 18.0% range (78 plans), with four plans earning returns
below 10.0% and three plans earning returns above 18.0%.
Generally, plans with greater allocations to equities earned
higher returns. The 19 plans with equity allocations of at least 50% earned an average return of 15.3% while the 22 plans with
equity allocations below 25% earned an average return of 12.6%.
The rate of return earned by the plan sponsor with the highest
allocation to equities (72.6%) was 17.0%, which was better
than the return of 12.4% for the plan sponsor with the lowest
allocation to equities (4.7%) in 2020.
FIGURE 3: ESTIMATED RATES OF RETURN EARNED IN 2020
(CALENDAR YEAR FISCAL YEARS ONLY)
In prior years, investment allocations made by plan sponsors
had showed a trend toward implementing LDI strategies.
Generally, this involves shifting more assets into fixed income
positions. This trend appears to have continued in 2020 as fixed
income allocations in the pension portfolios increased slightly
to an average of 50.2% during 2020, up from 49.2% at the end
of 2019. The percentage of pension fund assets allocated to
equities, fixed income, and other investments was 31.9%, 50.2%,
and 17.9%, respectively, at the end of FY2020, compared with
32.5%, 49.2%, and 18.3%, respectively, at the end of FY2019.
Much as with FY2019, when plans with high allocations to
fixed income (over 50%) slightly underperformed the other
plans (17.0% average return compared with 18.9%), in FY2020
the plans with high allocations to fixed income also slightly
underperformed the other plans (12.7% compared with 14.4%).
Over the last five years, the plans with consistently high
allocations to fixed income have slightly underperformed
the other plans while also experiencing lower funded ratio
volatility. Among the 85 companies in the Milliman PFS with
calendar fiscal years, 26 pension plans had fixed income
allocations greater than 40.0% at the end of FY2015 and
maintained an allocation of at least 40.0% through FY2020.
Over this five-year period, these 26 plans experienced lower
funded ratio volatility than the other 59 plans (an average
funded ratio volatility of 3.3% versus 4.4% for the other 59
plans) while earning a slightly lower five-year annualized rate
of return (an average of 9.3% versus 10.0%). Plans with at least
50% in fixed income have underperformed other plans over
three of the last five years.
FIGURE 4: FIXED INCOME ALLOCATION 50% OR HIGHER
(CALENDAR YEAR FISCAL YEARS ONLY)
Overall, allocations to equities decreased slightly during
FY2020, resulting in an average allocation of 31.9%. Only one of
the Milliman 100 companies had increases to equity allocations
of more than 10.0% in 2020. Two companies decreased their
equity allocations by more than 10.0% in 2020, compared with
six in 2019, 21 in 2018, one in 2017, and three in 2016.
Overall allocations to fixed income increased in FY2020,
resulting in an average allocation of 50.2%. Three companies
had decreases of more than 10.0% to their fixed income
allocations. Two companies increased their fixed income
allocations by more than 10.0% in 2020, compared with nine in
2019, 17 in 2018, three in 2017, and four in 2016.
FIGURE 5: ASSET ALLOCATION OVER TIME
Other asset classes include real estate, private equity, hedge funds,
commodities, and cash equivalents. More specific details on how
investments are allocated to the other categories are generally not
available in the U.S. Securities and Exchange Commission (SEC)
filings of the companies. Overall, allocations to other asset classes
decreased in FY2020, resulting in an average allocation of 17.9%.
A total of nine companies increased their allocations by 5.0%
or more to other asset classes during 2020 while six companies
decreased their allocations by 5.0% or more.
For comparison purposes, we have looked at historical changes
since FY2005, the first year when the Milliman 100 companies
consistently made allocation information available. The allocation
to equities was down from 61.8% and the allocation to fixed
income instruments was up from 28.7% at the end of FY2005. The
percentage of investments in other asset classes was also up from
the 9.5% allocation at the end of FY2005.
PRT activities continue
Plan sponsors continued to execute pension risk transfer (PRT)
activities in FY2020 as a way of divesting pension obligations
from their defined benefit (DB) plans and corporate balance
sheets, with the volume for the Milliman 100 companies
up slightly relative to FY2019. Large-scale pension buyout
programs or lump sum windows (with at least $1 billion
in settled assets) were transacted for five of the Milliman
100 companies as pension assets and liabilities were either
transferred to insurance companies or paid out to participants.
General Motors, Hewlett Packard, General Electric, Lockheed
Martin Corporation, and Verizon Communications reported total transactions of $2.6 billion, $2.4 billion, $1.7 billion, $1.4
billion, and $1.3 billion, respectively. General Motors is of some
interest to those who follow the PRT market as its transaction
was on behalf of a defined benefit plan in Canada. There were
likely a separate set of Canadian federal tax laws that had to
be followed and were quite different from Internal Revenue
Service (IRS) regulations.
The 2020 PRT market increased slightly when compared with
the 2019 market. For the 2021 PFS we estimate the dollar volume
of PRT activities based on Form 10-K disclosures for the 2020
fiscal year to be $15.8 billion. The estimated FY2020 dollar
amount represents an increase of $2.3 billion compared to the
FY2019 reported dollar volume of $13.5 billion.
PRTs in the form of buyout programs are deemed by plan
sponsors to be an effective way to reduce a pension plan’s
balance sheet footprint, but generally they have an adverse
effect on the plan’s funded status, as assets paid to transfer
accrued pension liabilities are higher than the corresponding
actuarial liabilities that are extinguished from plans. Much
of this incongruity stems from FASB pension plan valuation
rules, which differ from an insurance company’s underwriting
assessment of the same liabilities.
The Office of PBGC Participant and Plan Sponsor Advocate
has stated that the PBGC premiums are a core reason for plan
sponsors to divest DB plans. PBGC per-participant flat dollar
premiums increased to $83 in 2020 from $80 in 2019. The PBGC
“variable rate premium” increased to 4.5% of the pension plan’s
PBGC-funded status deficit in 2020, from 4.3% of the 2019
deficit. The PBGC’s funded status deficit uses interest rates
and mortality assumptions that are different from those used to
determine the funded status of the Milliman 100 companies.
Reconciliation with January 2021
Milliman 100 PFI
The FY2020 funded ratio of 88.4% was higher than we reported
in the January 2021 Milliman 100 Pension Funding Index (PFI).
The January 2021 PFI funded ratio of 88.2%, measured as of
December 31, 2020, was based on data collected for the 2020
Milliman PFS. The revised funded ratio of 88.4% from our
current study reflects the collection and collation of more
recent publicly available information for companies with
fiscal years ending in 2020. In addition, the PFS funded ratio is
aggregating plans with different fiscal year ending dates and
different discount rates,whereas the PFI makes normalizing
adjustments to approximate the values of all 100 companies
as of the same measurement date using the same average
discount rate.
Falling discount rates in FY2020
eroded the funded status, but asset
gains in excess of expected dampened
the decline
Discount rates used to measure plan obligations, determined
by reference to high-quality corporate bonds, decreased during
2020, thereby increasing liabilities. The average discount rate
decreased to 2.41% at the end of FY2020 from 3.08% in FY2019.
For historical perspective, discount rates have generally
declined from the 7.63% reported at the end of FY1999. Over
the last decade, discount rate increases have only occurred
during three fiscal years (2013, 2015, and 2018).
The increase in the PBO due to the lower discount rates offset
the favorable investment returns of 13.4%. The net impact of
investment gains, discount rates, contributions, and settlements
was relatively little change. The funded ratio improved slightly
from 87.5% to 88.4% in FY2020. However, due to the increase of
both the assets and liabilities, the funded deficit rose in FY2020
from $231.2 billion to $232.2 billion.
FIGURE 6: PENSION SURPLUS/(DEFICIT)
FIGURE 7: PENSION SURPLUS/(DEFICIT): ASSETS AND PBO
The effect of a decrease of 67 basis points in discount rates
offset the better-than-expected investment gains during
FY2020. Pension obligations rose 7.7% in FY2020, the primary
driver of which was the decrease in discount rates. This was
slightly dampened by the downward pressure on obligations
caused by PRT activity and revisions to the life expectancy
assumptions used to measure pension plan obligations. The net
result was a liability increase of $142.3 billion.
The 13.4% investment return (actual weighted average return
on assets during FY2020) resulted in an increase of $141.4
billion in the market value of plan assets after including $34.6
billion in contributions, approximately $15.8 billion paid out in
annuity purchases or lump sum settlements and $96 billion in
regular benefit payments. The Milliman 100 companies had set
their long-term investment gain expectations to be, on average,
6.2% during FY2020, down from the expectation of 6.5% set for
FY2019. That was the largest annual drop in return expectations
experienced over the last decade.
2020 funded ratio increases by 0.9%
The funded ratio of the Milliman 100 pension plans increased
during FY2020 to 88.4% from 87.5% at the end of FY2019.
Please note that not all of the 100 companies have a fiscal
year 2020 that corresponds to calendar year 2020. In order to
recognize that difference, we report a funded ratio of 88.5% for
the 85 plans with calendar fiscal years in 2020, up from 87.5% for
2019. Fifteen companies have different fiscal year starting dates.
Their funded status at the end of FY2020 is 87.1%. We also don’t
attempt to predict changes in the companies such as mergers
or divestitures (see our list of those changes on page 2) but
certainly that influenced the funded status change of this diverse
group of private employers.
The aggregate pension deficit decreased by $1.1 billion during
these calendar year companies’ 2020 fiscal years to $209.9 billion,
from an aggregate deficit of $211.0 billion at the end of FY2019.
For fiscal year 2020, funded ratios ranged from a low of 64.7% for
Proctor & Gamble to a high of 147.3% for NextEra Energy, Inc.
FIGURE 8: FUNDED RATIO, ASSETS/PBO
The 0.9% increase in the FY2020 funded ratio added to the
improvement seen over the prior three years. Note that there
has not been a funding surplus since the 105.6% funded ratio in
FY2007.
Sixteen of the 85 Milliman 100 companies with calendar
fiscal years reported surplus funded status at year-end 2020,
compared with 13 companies in 2019, 12 in 2018, 13 in 2017,
eight in 2016, nine in 2015, eight in 2014, and 18 in 2013. These
numbers pale in comparison with the 46 companies with
reported surplus funded status at year-end 2007. Fifty-four of
the Milliman 100 companies with calendar fiscal years reported
an increase in funded ratio for 2020, compared with 52 for 2019.
FIGURE 9: DISTRIBUTION BY FUNDED STATUS – 2015-2020
(CALENDAR YEAR FISCAL YEARS ONLY)
FY2020 pension expense decrease
There was a net decrease in FY2020 pension expense: a $17.7
billion charge to earnings ($8.5 billion lower than in FY2019).
This is well below the $56.3 billion peak level in FY2012. Forty
companies recorded FY2020 pension income (i.e., a credit
to earnings). Twenty-seven companies recorded income in
FY2019 and 32 companies in FY2018, up from nine in FY2012.
FIGURE 10: PENSION EXPENSE (INCOME) AND CONTRIBUTIONS
The aggregate 2020 cash contributions of the Milliman 100
companies were $34.6 billion, an increase of $1.0 billion from
the $33.6 billion contributed in 2019, $24.4 billion less than the
$59.0 billion in 2018, and $27.2 billion less than the 2017 level
of $61.8 billion. Contributions had started to increase in 2016
to $42.4 billion from the amounts contributed in 2015 and 2014
($31.3 billion and $40.7 billion, respectively).
Pension deficit increases as a
percentage of market capitalization
The total market capitalization for the Milliman 100 companies
decreased by 8.0%. The total pension deficit increased by
0.4%, so the net result was an increase in the unfunded pension
liability as a percentage of market capitalization to 2.9% at the
end of FY2020 compared with 2.7% at the end of FY2019 and
2.9% at the end of FY2018. Pension deficits represented more
than 10.0% of market capitalization for 22 of the Milliman 100
companies in FY2020, up a bit from 17 of the companies in
FY2019. This is, however, a substantial decrease from FY2012,
when 41 of the companies had deficits that were more than
10.0% of their market capitalizations.
Since FY2011, we have had investment gains exceeding
expectations in seven out of 10 years, which could have
contributed to elevated levels of market capitalization. In
FY2020, two companies’ plan deficits exceeded 50.0% of
market capitalization. This is down from nine in FY2011, the
year we first started tracking this figure.
FIGURE 11: UNDERFUNDED PENSION LIABILITY AS A PERCENTAGE
OF MARKET CAPITALIZATION 2017-2020
Investment performance
above expectations
The weighted average investment return on pension assets for
the 2020 fiscal years of the Milliman 100 companies was 13.4%,
which was above their average expected rates of return of
6.2%. Ninety-six of the Milliman 100 companies exceeded their
expected returns in 2020, compared to 95 in 2019. It is worth
noting that over the 12 years since the global financial crisis,
only three years resulted in adverse investment performance
where returns were below expectations.
At the end of FY2020, total asset levels were $1.765 trillion. This
is $498 billion above the value of $1.267 trillion at the end of
FY2007, prior to the collapse of the global financial markets.
FIGURE 12: INVESTMENT RETURN AMOUNTS IN $BILLION
ON PLAN ASSETS
During FY2020, investment gains and contributions were
partially offset by annuity purchases, lump sum settlements,
and regular benefit payments, increasing the market value of
assets by $141.4 billion. The Milliman 100 companies’ estimated
investment return for FY2020 was $211.6 billion compared
with the expected return of $95.1 billion, a difference of $116.5
billion. For the five-year period ending in 2020, investment
performance has averaged 9.7% compounded annually (only
considering plans with calendar fiscal years). There have
only been four years of negative investment returns over the
past 21 years (2001, 2002, 2008, and 2018), contributing to an
annualized investment gain of 6.7% over that period (again,
only considering plans with calendar fiscal years).
Expected rates of return
FIGURE 13: SPONSOR-REPORTED ASSUMED RATE OF RETURN
ON INVESTMENTS
Companies continued to lower their expected rates of return
on plan assets to an average of 6.2% for FY2020, as compared
with 6.5% for FY2019, 6.6% for FY2018, 6.8% for FY2017, 7.0%
for FY2016, 7.1% for FY2015, 7.3% for FY2014, 7.4% for FY2013,
7.6% for FY2012, 7.8% for FY2011, and 8.0% for FY2010. This
represents a significant drop from the average expected rate of
return of 9.4% back in FY2000.
Six of the Milliman 100 companies utilized an expected rate of
return for FY2020 of at least 8.0% (the highest was 8.97%). This
differs drastically from FY2000 in which all but one company
was above 8.0% (the highest was 10.90%).
What to expect in 2021 and beyond
Our expectations in the coming year include:
- Reductions in plan sponsor contributions are likely given the
funding relief provisions included in the American Rescue
Plan Act of 2021 (ARPA-21).
- Increase in federal taxes for corporations may influence DB
plan funding strategies more than the flexibility provided in
the ARPA-21. Proposals that have been floated are raising the
corporate tax rate to 28% from 21%.
- The one-time change in an election to defer cash
contributions to a defined benefit pension plan under the
CARES Act is unlikely to be repeated in future legislation.
- Regulatory compliance is likely to become additionally
burdensome for pension plans and other qualified
retirement plans (federal agency audits on “missing
participants,” changes in required minimum distributions,
potential re-filings of Form 5500s resulting from retroactive
applications of ARPA-21, etc.).
- Pension expense for companies with mature plans with
primarily inactive liabilities is expected to decrease compared
with the FY2020 level. This is due to the investment gains
experienced during 2020 as well as the significant drop in
discount rates. While the lower discount rates result in higher
pension obligations, the net effect will be a lowering of the
interest cost components of pension expense.
- On the other hand, for companies that are more interest rate
sensitive, and thus have higher durations of liabilities, the
gain from the expected return on assets could be offset by the
relative increases in the interest cost and loss amortization
components of pension expense. These companies could see
increases in pension expense in FY2021 relative to FY2020.
- With ARPA-21, we may see more investment de-risking as
plan sponsors pursue less risky investment strategies given
the longer cost amortization periods allowed.
- Given the passage of ARPA-21 funding relief, the generally
low interest rate environment and expected further recovery
from the global pandemic, the appetite for further pension
risk transfer activities such as lump sum windows and
pension buyouts in 2021 seems low or at best uncertain.
Appendix
HISTORICAL VALUES (All dollar amounts in millions. Numbers may not add up correctly due to rounding.)
FIGURE 14: FUNDED STATUS
FIGURE 15: RETURN ON ASSETS
HISTORICAL VALUES (All dollar amounts in millions. Numbers may not add up correctly due to rounding.)
FIGURE 16: PENSION COST
FIGURE 17: ASSET ALLOCATIONS (BY PERCENTAGE)
HISTORICAL VALUES (All dollar amounts in millions. Numbers may not add up correctly due to rounding.)
FIGURE 18: PENSION PLAN INFORMATION BY BUSINESS SECTOR
FIGURE 19: OPEB FUNDED STATUS
Who are the Milliman 100 companies?
The Milliman 100 companies are the 100 U.S. public companies with the largest defined benefit (DB) pension plan assets for which
a 2020 annual report was released by March 5, 2021.
This 2021 report is Milliman’s 21st annual study. The total value of the pension plan assets of the Milliman 100 companies was
$1.77 trillion at the end of FY 2020.
About the study
The results of the Milliman 2021 Pension Funding Study (PFS)
are based on the pension plan accounting information disclosed
in the footnotes to the companies’ Form 10-K annual reports
for the 2020 fiscal year and for previous fiscal years. These
figures represent the GAAP accounting information that public
companies are required to report under Financial Accounting
Standards Board (FASB) Accounting Standards Codification
Subtopics 715-20, 715-30, and 715-60. In addition to providing the
financial information on the funded status of their 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 from
those for U.S. qualified pension plans. The information, data, and
footnotes do not represent the funded status of the companies’
U.S. qualified pension plans under ERISA.
Fifteen of the companies in the 2021 Milliman Pension Funding
Study had fiscal years other than the calendar year. The
2021 study includes three new companies to reflect mergers,
acquisitions, and other corporate transactions during FY 2020.
Figures quoted from 2020 reflect the 2021 composition of
Milliman 100 companies and may not necessarily match
results published in the 2020 Milliman PFS. Generally, the
group of Milliman 100 companies selected remains consistent
from year to year. Privately held companies, mutual insurance
companies, and U.S. subsidiaries of foreign parents were
excluded from the study.
The results of the 2021 study will be used to update the Milliman
100 Pension Funding Index (PFI) as of December 31, 2020, the
basis of which will be used for projections in 2021 and beyond.
The Milliman 100 PFI is published on a monthly basis and
reflects the effect of market returns and interest rate changes on
pension funded status.
About the authors
Zorast Wadia, FSA, CFA, EA, MAAA, is a principal and
consulting actuary in the New York office of Milliman. He has
more than 20 years of experience in advising plan sponsors on
their retirement programs. Zorast has expertise in the valuation
of qualified and nonqualified plans. He also has expertise in the
areas of pension plan compliance, design, and risk management.
Alan H. Perry, FSA, CFA, MAAA, is a principal and consulting
actuary in the Philadelphia office of Milliman. He has more
than 30 years of experience in advising plan sponsors on asset
allocation and financial risk management. Alan specializes
in the development of investment policies by performing
asset-liability studies that focus on asset mix, liability-driven
investing, and risk hedging.
Charles J. Clark, ASA, EA, MAAA, is a principal and director
of the employee benefits research group in the Washington,
D.C., and New York offices of Milliman. He has over 40 years
of experience as a consulting actuary. Charles provides analysis
of employee benefits legislation, regulations, and accounting
standards to Milliman consultants. He has worked extensively
with plan sponsors, Washington, D.C., employee benefits trade
groups, and lawmakers on employee benefits program strategy,
design, pricing, and interpretation.
Acknowledgments
The authors thank the following Milliman colleagues for their
assistance in compiling the figures and editing the report for
the Milliman 2021 Pension Funding Study: Shweta Bedi, Erin
Berge, Amanda Cohen, Keila Cohen, Ryan Cook, Mary Der,
Rebecca Driskill, Kevin Ferris, Simran Hora, Naman Jain,
Jeremy Engdahl-Johnson, Smriti Kohli, Mirella Lugo, Rohan
Malik, Jamie Phillips, Javier Sanabría, Esther Schewel, Mike
Wilson, Kyle Wood, and Lynn Yu.