Corporate pension funding rate jumps to 112.8% in October thanks to higher discount rates
Milliman 100 PFI Funding Status Improves by $47 billion
SEATTLE, November 4, 2022 /PRNewswire/ — Milliman, Inc., a leading global actuarial and consulting firm, today released the results of its latest Milliman 100 Pension Funding Index (PFI), which analyzes the top 100 company pension plans in the United States.
In October, the Milliman 100 PFI capitalization ratio fell from 108.8% to September 30 at 112.8% on October 31, hitting a new high for the year. The change was driven by a 35 basis point increase in the monthly discount rate. The projected benefit obligation of the PFI decreased to $1.266 trillion while the discount rate fell from 5.36% in September to 5.71% in October, the highest rate since March 2010. This increase helped offset October’s flat investment returns of 0.21%, which reduced the value of the Milliman 100 PFI asset by $4 billion.
“Although equity markets saw significant growth in October, the Milliman 100 plans are heavily weighted in fixed income securities, where rising interest rates weighed on performance,” said co-author Zorast Wadia. of the PFI. “Nevertheless, October’s discount rate increase helped the plans achieve their largest monthly funding gain and highest funded ratio so far this year.”
Going forward, under optimistic forecasts with rising interest rates (reaching 5.81% by the end of 2022 and 6.41% by the end of 2023) and gains in assets (annual returns of 9.9%), the capitalization ratio would increase to 115% by the end of 2022 and 129% by the end of 2023. According to a pessimistic forecast (5.61% discount at the end of 2022 and 5.01% by the end of 2023 and annual returns of 1.9%), the capitalization ratio would decrease to 111% by the end of 2022 and 101% by end of 2023.
For the complete Pension Plan Funding Index, go to www.milliman.com/pfi. To view Milliman’s full suite of annual pension funding studies, please visit https://www.milliman.com/en/retirement-and-benefits/pension-funding-studies. To receive regular updates on Milliman’s pension funding analysis, contact us at [email protected].
Milliman is one of the world’s largest providers of actuarial and related products and services. The firm has consulting practices in the areas of health, property and casualty insurance, life insurance and financial services, as well as employee benefits. Founded in 1947, Milliman is an independent company with offices in major cities around the world. For more information, visit milliman.com.