Milliman Analysis: Corporate Pension Funded Ratio Declines to 97.6% In November Due to Investment Losses

Milliman 100 PFI Updates Funding Forecast Out to the Year 2023

Milliman, Inc., a premier global consulting and actuarial firm, released the results of its latest Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest US corporate pension plans.

In November, a 0.36% investment loss for these plans was only slightly alleviated by a $3 billion liability improvement, leading to an $11 billion drop in the PFI funded status. The discount rate remained flat for the month at 2.72%, with no change in the benchmark corporate bond interest rates used to value pension liabilities. The funded ratio for these plans declined from 98.2% at the end of October to 97.6% as of November 30.

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“While November was a down month for corporate pensions, the past 12 months have seen significant improvement, climbing from 88.5% to 97.6% as of November 30^th,” said Zorast Wadia, author of the Milliman 100 PFI.

“Looking forward, if these pensions achieve the PFI expected return of 6.2% and maintain the current discount rate of 2.72%, the plans will be more than fully funded – at 101.2% – by the end of 2022.”

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Looking forward, under an optimistic forecast with rising interest rates (reaching 3.37% by the end of 2022 and 3.97% by the end of 2023) and asset gains (10.2% annual returns), the funded ratio would climb to 115% by the end of 2022 and 134% by the end of 2023.  Under a pessimistic forecast (2.07% discount rate at the end of 2022 and 1.47% by the end of 2023 and 2.2% annual returns), the funded ratio would decline to 88% by the end of 2022 and 80% by the end of 2023.

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