The funded status of the 100 largest U.S. corporate defined benefit pension plans maintained its $46 billion surplus in June while the funded ratio rose from 103.6% at the end of May to 103.7% as of June 30, as measured by the Milliman 100 Pension Funding Index (PFI). A decrease in the benchmark corporate bond interest rates resulted in a $9 billion increase in pension liabilities for the period; however, pension assets also rose on the same order due to strong investment returns. As a result of the offsetting liability and asset growth, the funded status improvement was hardly noticeable after rounding. The mid-year funded ratio is ahead of the 99.5% funded ratio seen at the start of 2024.
The market value of PFI plan assets increased by $9 billion during June thanks to the month’s 1.22% investment return. The Milliman 100 PFI asset value rose to $1.308 trillion as of June 30, 2024, from $1.299 trillion as of May 31, 2024. 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 Milliman 100 PFI projected benefit obligation (PBO) increased to $1.262 trillion from $1.253 trillion during June. The change resulted from a decrease of 7 basis points (bps) in the monthly discount rate, from 5.53% in May to 5.46% for June. June’s discount rate is 46 bps higher than the 5.00% discount rate seen at the start of 2024.
Highlights
| $ BILLION | FUNDED PERCENTAGE | |||
|---|---|---|---|---|
| MV | PBO | FUNDED STATUS | ||
| May | 1,299 | 1,253 | 46 | 103.6% |
| June | 1,308 | 1,262 | 46 | 103.7% |
| Monthly change | +9 | +9 | +1 | 0.1% |
| YTD Change | (19) | (72) | +53 | 4.2% |
Note: Numbers may not add up precisely due to rounding
Second Quarter 2024 Summary
For the quarter ending June 30, 2024, plan assets fell by $16 billion; however, plan liabilities dropped by $33 billion during the period—more than double. While the investment return was a modicum 0.35% during the second quarter, discount rates climbed by 22 bps and had a much greater impact on funded status. The net result was a funded status improvement of $18 billion, while the funded status surplus grew to $46 billion by the end of the second quarter. The funded ratio of the Milliman 100 plans increased to 103.7% at the end of June from 102.2% at the end of March.
Over the last 12 months (July 2023 – June 2024), the cumulative asset return for these plans was 5.9%, and the Milliman 100 PFI funded status position improved by $31 billion. The funded status growth was primarily fueled by higher discount rates, which rose to 5.46% from 5.20% one year ago. The funded ratio of the Milliman 100 companies has improved over the past 12 months, to 103.7% from 101.2%.
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 5.46% remains unchanged throughout 2024 and 2025, we forecast that the funded status of the surveyed plans will increase. The pension surplus is projected to be $52 billion (funded ratio of 104.2%) by the end of 2024 and $65 billion (funded ratio of 105.2%) 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 5.76% by the end of 2024 and 6.36% 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 122% by the end of 2025. Under a pessimistic forecast with similar interest rate and asset movements (5.16% discount rate at the end of 2024 and 4.56% by the end of 2025 and 2.4% annual asset returns), the funded ratio is projected to decline to 99% by the end of 2024 and 90% by the end of 2025.
Milliman 100 Pension Funding Index - July 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.