The funded status of the 100 largest U.S. corporate defined benefit pension plans rose by $4 billion during May, as measured by the Milliman 100 Pension Funding Index (PFI). The funded status surplus improved to $43 billion as of May 31, up from $39 billion at the end of April, driven by strong investment returns. This helped to offset May’s rise in plan liabilities caused by a decline in the benchmark corporate bond interest rates used to value those liabilities. As of May 31, the funded ratio rose to 103.4%, up from 103.1% at the end of April. This result builds on an impressive first four months of 2024, which saw a $45 billion improvement in funded status and the funded ratio reaching its highest point since November 2022.
The Milliman 100 PFI asset value rose by $22 billion in May, to $1.296 trillion, driven by investment returns of 2.29%, the strongest monthly returns of the year. 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.
Highlights
| $ BILLION | FUNDED PERCENTAGE | |||
|---|---|---|---|---|
| MV | PBO | FUNDED STATUS | ||
| April | 1,274 | 1,235 | 39 | 103.1% |
| May | 1,296 | 1,253 | 43 | 103.4% |
| Monthly change | +22 | +18 | +4 | 0.3% |
| YTD Change | (32) | (81) | +49 | 3.9% |
Note: Numbers may not add up precisely due to rounding
The PFI projected benefit obligation, or pension liabilities, increased by $18 billion during May to $1.253 trillion as of May 31. This was due to a decrease of 15 basis points in the monthly discount rate to 5.53% for May from 5.68% for April.
Over the last 12 months (June 2023 to May 2024), the cumulative asset return for these pensions has been 6.44% and the Milliman 100 PFI funded status surplus grew by $48 billion. Strong investment returns and higher discount rates drove this result. The funded ratio of the Milliman 100 plans has increased to 103.4% from 99.6% over the past 12 months.
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 expected 6.4% median asset return (as per the 2024 PFS), and if the current discount rate of 5.53% 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 $49 billion (funded ratio of 104.0%) by the end of 2024 and $61 billion (funded ratio of 104.9%) 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 5.88% by the end of 2024 and 6.48% by the end of 2025) and annual asset returns of 10.4%, the funded ratio is projected to climb to 110% by the end of 2024 and 123% by the end of 2025. Under a pessimistic forecast with similar interest rate and asset movements (5.18% discount rate at the end of 2024 and 4.58% by the end of 2025 and 2.4% annual asset returns), the funded ratio is projected to decline to 98% by the end of 2024 and 89% by the end of 2025.
Milliman 100 Pension Funding Index - June 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.