Milliman analysis: July’s surging discount rates lift corporate pension funding to highest level in more than 25 years

Declining liabilities offset market losses to lift Milliman PFI funded ratio to 112.1%

SEATTLE--(BUSINESS WIRE)--Milliman, Inc., a premier global consulting and actuarial firm, today released its monthly Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans.

The funded status of the Milliman PFI plans grew by $25 billion during July, driven by a 41-basis-point increase in discount rates, from 5.61% in June to 6.02% in July. This shaved $52 billion off plan liabilities.

Plan assets also fell during the month, from $1.323 trillion to $1.296 trillion, thanks to below-expected market returns of -1.55%. But this was not enough to offset the funded status improvement, and the Milliman PFI funded ratio soared to 112.1% as of July 31.

“Although July’s investment underperformance caused a substantial drop in plan assets, this was more than offset by the large jump in discount rates, which caused an even bigger reduction in plan liabilities,” said Zorast Wadia, author of the Milliman PFI. “The last time the funded ratio was this high was in March 2001, making it advisable for plan sponsors to lock in gains now with prudent asset-liability management strategies.”

Looking ahead, under an optimistic scenario (discount rate reaching 6.27% by end of 2026 and 10.61% annual returns), the funded ratio could reach 117% by end of 2026 and 130% by end of 2027. Under a pessimistic scenario (5.77% discount rate and 2.61% annual returns), the funded ratio could fall to 108% by end of 2026 and 98% by end of 2027.

Read this month’s complete Pension Funding Index or Milliman’s full range of annual Pension Funding Studies. For regular updates of Milliman’s pension funding analysis, email [e-mail].

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