Year in review
The funded status of the 100 largest U.S. corporate pension plans experienced a tremendous improvement in 2024, driven by a net increase in discount rates of 59 basis points (bps) for the year. While investment returns for the year were below expectations, the pension liability declines due to the rise in discount rates drove the overall funding amelioration. The net result was a funded status improvement of $68 billion for the year—a stark contrast to the $31 billion funded status loss experienced during 2023.
Plan assets for the Milliman 100 companies posted a cumulative annual return of 4.23%. The monthly expected investment return during 2024 was 0.52% (6.4% annualized), as reported in our 2024 Milliman Pension Funding Study (PFS). Investment returns have been above PFS expectations in six of the last 10 years. Our 2024 PFS showed heavy concentrations of fixed income investments (54%), and corporate pension plan assets underperformed given the corresponding net discount rate increases. For reference, the discount rate was 5.00% at the end of December 2023 and 5.59% at the end of December 2024.
Highlights
| $ BILLION | FUNDED PERCENTAGE | |||
|---|---|---|---|---|
| MV | PBO | FUNDED STATUS | ||
| November | 1,341 | 1,292 | 48 | 103.7% |
| December | 1,302 | 1,240 | 62 | 105.0% |
| Monthly change | (39) | (53) | +14 | 1.3% |
| YTD Change | (26) | (94) | +68 | 5.5% |
Note: Numbers may not add up precisely due to rounding
Overall, the year-end 2024 funded ratio soared to 105.0% from 99.5% at the end of 2023. While plan assets decreased by $26 billion, plan liabilities decreased by $94 billion due to the aforementioned discount rate increases. The resulting $68 billion funded status gain during 2024 lifted the year-end funded status surplus to $62 billion.
The projected asset and liability figures presented in this analysis will be adjusted as part of Milliman’s annual 2025 PFS, which will summarize and present the most recent plan sponsor financials reported to the Securities and Exchange Commission. The 2025 PFS will also reflect reported pension settlement and annuity purchase activities that occurred during 2024. De-risking transactions generally result in reductions in pension funded status since the assets paid to the participants or assumed by the insurance companies as part of the risk transfer are typically larger than the corresponding liabilities that are extinguished from the balance sheets. To offset this decrease, many companies engaging in de-risking transactions make additional cash contributions to their pension plans to improve the plan’s funded status.
Figure 1: Milliman 100 Pension Funding Index — Pension surplus/deficit
Figure 2: Milliman 100 Pension Funding Index — Pension funded ratio
Quarterly review
Corporate pensions saw steadily increasing funded ratios during 2024.
- In the first quarter of 2024, discount rates rose 24 bps to 5.24%, which caused plan liabilities to decline. The market value of assets had minor gains, with year-to-date investment returns of 1.31%. The net result was an improvement in the funded ratio to 102.2% from 99.5%, while the funding surplus rose to $29 billion.
- The second quarter of 2024 saw a similar funding improvement as plan liabilities declined due to rising discount rates while asset returns remained flat. The funded ratio improved to 103.5% as of June 30, with the funding surplus climbing to $44 billion.
- The funded status surplus decreased by $11 billion during the third quarter as discount rates declined during this period by 50 bps, dropping below the 5.00% mark seen at the start of the year. This caused plan liabilities to soar by $68 billion. However, plan asset returns were also the greatest during the third quarter, resulting in a $57 billion improvement. Despite these asset gains, the funded ratio fell to 102.5% as of September 30.
- The fourth quarter of 2024 saw the largest funding improvement of the year. Discount rates soared 63 bps and plan liability declines outweighed asset declines, primarily with respect to plan fixed income investments, resulting in a $29 billion funding improvement for the quarter. The Milliman 100 PFI funded ratio climbed to 105.0% as of December 31, approximately 5.5% ahead of where it started 12 months ago.
Pension plan accounting information disclosed in the footnotes of the Milliman 100 companies’ annual reports for the 2024 fiscal year is expected to be available during the first quarter of 2025 and will be published, along with our comprehensive recap, in April as part of the 2025 Milliman PFS.
Milliman 100 Pension Funding Index - January 2025 (all dollar amounts in millions)
Pension asset and liability returns
2025-2026 projections
If the Milliman 100 PFI companies were to achieve the expected 6.4% median asset return (as per the 2024 PFS), and if the current discount rate of 5.59% remains unchanged throughout 2025 and 2026, we forecast that the funded status of the surveyed plans would increase. The pension surplus is projected to be $74 billion (funded ratio of 106.0%) by the end of 2025 and $85 billion (funded ratio of 107.0%) by the end of 2026. For purposes of this forecast, we have assumed 2025 and 2026 aggregate annual contributions of $25 billion.
Under an optimistic forecast with rising interest rates (reaching 6.19% by the end of 2025 and 6.79% by the end of 2026) and annual asset returns of 10.4%, the funded ratio is projected to climb to 117% by the end of 2025 and 131% by the end of 2026. Under a pessimistic forecast with similar interest rate and asset movements (4.99% discount rate at the end of 2025 and 4.39% by the end of 2026 and 2.4% annual asset returns), the funded ratio is projected to decline to 95% by the end of 2025 and 87% by the end of 2026.
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.