The funded status of the 100 largest corporate defined benefit pension plans fell by $3 billion during September, as measured by the Milliman 100 Pension Funding Index (PFI). A decrease in the benchmark corporate bond interest rates used to value pension liabilities led to an increase in plan liabilities, which outweighed plan asset gains during September. As of September 30, the funded ratio inched downward to 102.4%, from 102.6% at the end of August, and the funded status surplus decreased to $32 billion.
The Milliman 100 PFI asset value rose to $1.362 trillion as of September 30, 2024. The market value of plan assets increased by $17 billion because of September’s 1.74% investment return. By comparison, the 2024 Milliman Pension Funding Study reported that the monthly expected investment return for 2023 was 0.52% (6.4% annualized). The full results of the annual 2024 study can be found at www.milliman.com/pfs.
The combined plans’ projected benefit obligation rose by $19 billion during September, increasing the Milliman 100 PFI value to $1.330 trillion. The change resulted from a decline of 14 basis points (bps) in the monthly discount rate, to 4.96% for September from 5.10% in August. The last time discount rates fell below 5% was 18 months ago, in April 2023.
Highlights
| $ BILLION | FUNDED PERCENTAGE | |||
|---|---|---|---|---|
| MV | PBO | FUNDED STATUS | ||
| August | 1,345 | 1,310 | 35 | 102.6% |
| September | 1,362 | 1,330 | 32 | 102.4% |
| Monthly change | +17 | +19 | (3) | -0.2% |
| YTD Change | +34 | (4) | +38 | 2.9% |
Note: Numbers may not add up precisely due to rounding
Third-quarter summary
During the quarter ended September 30, 2024, the funded status surplus for the Milliman 100 PFI plans fell by $12 billion. August had the largest monthly funded status loss due to discount rates falling 20 bps. Asset returns in the third quarter were strong but not strong enough to offset liability increases on account of declining discount rates. The funded ratio of the Milliman 100 companies dropped to 102.4% at the end of September from 103.5% at the end of June.
Over the last 12 months, from October 2023 to September 2024, the cumulative asset return for these pension plans has been 17.3%, and the Milliman 100 PFI funded status position has improved by $12 billion. The funded status gain is primarily the result of robust asset performance over the past 12-month period. Despite discount rates falling by 88 bps, to 4.96% from 5.84% one year ago, the funded ratio of the Milliman 100 companies has increased over the past 12 months, to 102.4% from 101.6%.
Figure 1: Milliman 100 Pension Funding Index — Pension surplus/deficit
Figure 2: Milliman 100 Pension Funding Index — Pension funded ratio
2024-2025 projections
If the Milliman 100 PFI plans were to achieve the average expected 6.4% asset return (as per the 2024 PFS), and if the current discount rate of 4.96% 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 $36 billion (funded ratio of 102.7%) by the end of 2024 and $53 billion (funded ratio of 104.1%) by the end of 2025. For purposes of this forecast, we have assumed 2024 and 2025 aggregate annual contributions of $25 billion.
Under an optimistic forecast with rising interest rates (reaching 5.11% by the end of 2024 and 5.71% by the end of 2025) and annual asset returns of 10.4%, the funded ratio is projected to climb to 105% by the end of 2024 and 118% by the end of 2025. Under a pessimistic forecast with similar interest rate and asset movements (4.81% discount rate at the end of 2024 and 4.21% by the end of 2025 and 2.4% annual asset returns), the funded ratio is projected to decline to 100% by the end of 2024 and 91% by the end of 2025.
Milliman 100 Pension Funding Index - October 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.