Milliman, Inc., a leading global consulting and actuarial firm, has released its latest Milliman 100 Pension Funding Index (PFI), which examines the performance of the 100 largest U.S. corporate pension plans.
Largest Funded Ratio Drop of 2024 in August
In August, the funded ratio of the Milliman 100 PFI plans fell from 103.6% at the end of July to 102.8% by August 31. While the plans saw investment gains of 1.81%, boosting their market value by $17 billion to $1.347 trillion, this increase was overshadowed by a 20-basis-point drop in discount rates. The rates fell from 5.30% in July to 5.10% in August, raising projected benefit obligations by $27 billion to $1.310 trillion and reducing the funding surplus by $10 billion, leaving a surplus of $36 billion by the end of the month.
“August’s funded ratio drop was the largest monthly decline of 2024,” said Zorast Wadia, author of the PFI. “While both assets and liabilities grew, the increase in liabilities outpaced investment gains. As markets soften and discount rates decline, we can expect volatility in pension funded status, emphasizing the importance of asset-liability matching for sponsors.”
Forecasts for 2024 and 2025
Looking forward, Milliman projects two potential scenarios. In an optimistic forecast, with interest rates rising to 5.30% by the end of 2024 and 5.90% by 2025, and annual asset returns of 10.4%, the funded ratio could reach 107% by year-end 2024 and 120% by the end of 2025. In a pessimistic scenario, with interest rates dropping to 4.90% in 2024 and 4.30% in 2025, and annual asset returns of 2.4%, the funded ratio could fall to 100% by the end of 2024 and 90% by 2025.
For the full Pension Funding Index and Milliman’s range of pension funding studies, visit Milliman’s website.
About Milliman
Founded in 1947, Milliman is one of the largest global providers of actuarial services, with expertise in healthcare, insurance, financial services, and employee benefits. The firm operates independently with offices worldwide. For more information, visit milliman.com.
