The funded status of the 100 largest corporate defined benefit
pension plans rose by $62 billion during March as measured
by the Milliman 100 Pension Funding Index (PFI). The funded
status deficit improved to $29 billion from $91 billion at the end
of February 2021, due to liability gains incurred during March.
The liability improvement was the result of an increase in the
benchmark corporate bond interest rates used to value pension
liabilities. As of March 31, 2021, the funded ratio rose to 98.4%,
up from 95.1% at the end of February. March’s increase caps
an impressive first quarter of 2021, which saw a $161 billion
improvement in funded status. The Milliman 100 PFI funded
status is now less than two percentage points away from full
funding (at 100%), as the deficit has declined by almost a
quarter of a trillion dollars since September 30, 2020.
The Milliman 100 PFI asset value remained at $1.760 trillion
during March due to a relatively low monthly return of 0.37%.
By comparison, the 2021 Milliman Pension Funding Study
reported that the monthly median expected investment return
during 2020 was 0.50% (6.2% annualized).
The projected benefit obligation (PBO), or pension liabilities,
decreased to $1.789 trillion at the end of March. The change
resulted from an increase of 24 basis points in the monthly
discount rate to 3.12% for March from 2.88% for February 2021.
This was the first time discount rates have exceeded 3% at
month-end in the last 12 months.
FIGURE 1: MILLIMAN 100 PENSION FUNDING INDEX — PENSION SURPLUS/DEFICIT
FIGURE 2: MILLIMAN 100 PENSION FUNDING INDEX — PENSION FUNDED RATIO
First quarter of 2021: Summary
For the quarter ending March 31, 2021, assets fell by $19 billion
compared to plan liabilities, which decreased by $179 billion.
While investment returns were a paltry 0.09% during the first
quarter of 2021, discount rates rose 66 basis points and helped
to propel the funded status improvement. The funded status
deficit fell to $29 billion by the end of the first quarter. The
funded ratio of the Milliman 100 companies improved to 98.4%
at the end of March from 90.3% at the beginning of 2021.
Over the last 12 months (April 2020-March 2021), the cumulative
asset return for these pensions has been 18.6% and the Milliman
100 PFI funded status deficit has improved by $204 billion. The
funded status gain is primarily the result of stellar investment
returns over the last 12-month period. Discount rates declined
through most of 2020 and only recently showed upward
movements during the first quarter of 2021. One year ago, the
discount rate was 3.39% compared to 3.12% as of March 31, 2021,
signifying a net drop of 27 basis points over the last 12 months.
PFI reconciliation
This PFI publication reflects the annual update of the
Milliman 100 companies and their 2020 financial figures
included in the Milliman 2021 Pension Funding Study. The
revised December 31, 2020 pension obligation was $12 billion
lower than we previously projected after accounting for
lump-sum window settlements and pension risk transfers
(de-risking activities) and updated mortality assumptions as
of year-end 2020. The actual PFI asset value was $33 billion
higher than projected due to actual investment gains that were
higher than anticipated during 2020.
The net adjustments introduced by the Milliman 2021 Pension
Funding Study led to a funded status gain of $45 billion and a
corresponding increase to the funded ratio, bringing it from
88.1% to 90.3% as of December 31, 2020.
2021-2022 projections
If the Milliman 100 PFI companies were to achieve the expected
6.2% median asset return (as per the 2021 pension funding study),
and if the current discount rate of 3.12% were maintained during
2021 and 2022, we forecast that the funded status of the surveyed
plans would increase. This would result in a projected pension
surplus of $9 billion (funded ratio of 100.5%) by the end of 2021
and a projected pension surplus of $65 billion (funded ratio of
103.7%) by the end of 2022. For purposes of this forecast, we have
assumed 2021 and 2022 aggregate annual contributions of $25
billion and $28 billion, respectively.
Under an optimistic forecast with rising interest rates (reaching
3.57% by the end of 2021 and 4.17% by the end of 2022) and
asset gains (10.2% annual returns), the funded ratio would
climb to 110% by the end of 2021 and 127% by the end of 2022.
Under a pessimistic forecast with similar interest rate and asset
movements (2.67% discount rate at the end of 2021 and 2.07% by
the end of 2022 and 2.2% annual returns), the funded ratio would
decline to 92% by the end of 2021 and 84% by the end of 2022.
MILLIMAN 100 PENSION FUNDING INDEX — MARCH 2021 (ALL DOLLAR AMOUNTS IN MILLIONS)

PENSION ASSET AND LIABILITY RETURNS

About the Milliman 100 Monthly Pension Funding Index
For the past 21 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 2020 fiscal year and for previous fiscal years. This pension
plan accounting disclosure information was summarized as
part of the Milliman 2021 Pension Funding Study, which was
published on April 7, 2021. 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.