Consulting and actuarial firm Milliman has released the results of its latest Milliman 100 Pension Funding Index (PFI), which analyses the 100 largest US corporate pension plans.
During May, the Milliman 100 PFI funded ratio rose from 103.1% at the end of April to 103.4% as of 31st May, driven by investment returns of 2.29%, the best-performing month of 2024. These gains lifted the net market value of PFI plan assets by $22bn for the month, to $1.296trn. They helped offset the decline in discount rates, which fell in May by 15 basis points, to 5.53%, and caused plan liabilities to rise $18bn to $1.253trn as of 31st May.
“May marks the fifth consecutive month of funding improvements, though the reason was the opposite of what we saw in April,” said Zorast Wadia, author of the PFI.
“While discount rates fell in May, driving up liabilities, robust market returns helped the Milliman PFI plan assets and funded ratio continue to rise.”
Looking ahead, 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 would 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 returns), the funded ratio is projected to decline to 98% by the end of 2024 and 89% by the end of 2025.
