A Fresh Look at Milliman’s Pension Funding Analysis
Milliman, Inc., the global consulting and actuarial firm, has released the latest results from its Milliman 100 Pension Funding Index (PFI). The PFI tracks the financial health of the 100 largest U.S. corporate pension plans and offers a clear, month-by-month view of how plan assets stack up against projected obligations.
August’s Funded Status: A Step Down
In August, the funded ratio slipped—from 103.6% at the end of July to 102.8% by August 31. Plans did record investment gains of 1.81%, adding $17 billion to market value and bringing total assets to $1.347 trillion. Still, those gains weren’t enough to make up for what happened on the liability side as discount rates moved lower.
Discount Rates Drove Liability Growth
Discount rates fell from 5.30% to 5.10% during the month. That drop pushed the projected benefit obligation up by $27 billion, to $1.310 trillion. With assets rising but liabilities rising more, the funding surplus narrowed by $10 billion, landing at $36 billion as of August 31.
What Milliman Says
Zorast Wadia, the author of the PFI, noted, "August’s funded ratio drop was the largest monthly decline of 2024. Both assets and liabilities saw increases this month, but the investment gains were not enough to offset the rise in liabilities. As markets descend from historical highs, the volatility in pension funded status indicates that maintaining robust asset-liability matching strategies is prudent for plan sponsors."
Possible Paths From Here
Milliman models a range of outcomes based on reasonable economic assumptions. In a more optimistic path—where interest rates improve to 5.30% by the end of 2024 and 5.90% by the end of 2025, paired with an expected annual investment return of 10.4%—the funded ratio could reach 107% by year-end 2024 and rise to 120% by the close of 2025.
In a more cautious scenario—assuming discount rates of 4.90% by the end of 2024 and 4.30% by 2025, along with lower annual returns of 2.4%—the funded ratio could move to 100% by the end of 2024 and then ease to 90% by the end of 2025.
Where to Learn More
For a deeper dive into the Pension Funding Index and its methodology, Milliman offers detailed resources. You can also review the firm’s annual Pension Funding Studies, which gather and interpret long-run trends to put monthly moves in context.
About Milliman
Founded in 1947, Milliman is a major provider of actuarial and consulting services worldwide. The firm works across healthcare, property and casualty insurance, life insurance, financial services, and employee benefits. With offices in key markets around the globe, Milliman continues to inform retirement and pension planning with data-driven analysis and practical insight.
Frequently Asked Questions
What is the Milliman 100 Pension Funding Index (PFI)?
It’s a monthly snapshot of the 100 largest U.S. corporate pension plans, tracking plan assets and projected obligations to show how well plans are funded and how that status changes over time.
Why did the funded ratio decline in August?
Discount rates fell from 5.30% to 5.10%, which increased liabilities more than assets rose. Even with a 1.81% investment gain, liabilities grew faster, pulling the funded ratio down from 103.6% to 102.8%.
What are the key August figures I should remember?
Assets increased by $17 billion to $1.347 trillion; projected benefit obligations rose by $27 billion to $1.310 trillion. The funding surplus narrowed by $10 billion, ending at $36 billion as of August 31.
How do Milliman’s scenarios frame the road ahead?
In an optimistic scenario (interest rates at 5.30% by end-2024 and 5.90% by end-2025, with 10.4% annual returns), the funded ratio could reach 107% in 2024 and 120% in 2025. In a pessimistic scenario (rates at 4.90% by end-2024 and 4.30% by 2025, with 2.4% returns), it could be 100% by end-2024 and 90% by end-2025.
Where can I find ongoing updates and deeper analysis?
Check Milliman’s Pension Funding Index materials and the annual Pension Funding Studies, which compile more detailed analysis and context around monthly results.