U.S. corporate pension funding surpluses improved in October thanks to rising discount rates that brought liability values down, according to the latest Milliman 100 Pension Funding index.
Milliman estimated that the aggregate funding ratio of the 100 largest U.S. corporate pension plans rose to 103.4 as of Oct. 31, up from 102.5% at the end of September.
The rise in the funding ratio after two consecutive months of declines came despite an estimated investment loss of 2.5% during October, thanks to a rise in discount rates to 5.31% as of Oct. 31 from 4.96% at the end of September.
The decline in liability values well offset the decline in asset values as a result, Milliman reported.
"The oscillating funded ratio serves as a reminder that managing funded status volatility should remain a top priority for plan sponsors as we head toward year-end,” said Zorast Wadia, principal and consulting actuary at Milliman and author of the pension funding index, in a news release Nov. 7.
Under an optimistic forecast of annual returns of 10.4% and discount rates reaching 5.4% by the end of 2024 and 6% by the end of 2025, Milliman estimates the funding ratio would reach 105% and 118% at those year-ends, respectively. The pessimistic forecast of a discount rate of 5.2% by the end of 2024 and 4.6% by the end of 2025, coupled with annual returns of 2.4%, the funding ratio would be 102% by the end of 2024 and 92% by the end of 2025.
