Despite a negative investment return environment for the year, U.S. corporate pension plan funding ratios finished 2022 well above 100%, according to a Milliman report.
The estimated aggregate funding ratio of the largest 100 U.S. corporate pension plans was 110% as of Dec. 31, up from 97.9% a year earlier, according to the Milliman 100 Pension Funding index.
The increase came despite estimated investment returns for the year ended Dec. 31 of -13.5%, according to Milliman. It came thanks to massive interest rate hikes, which lowered the aggregate liabilities of the pension plans by $493 billion, more than enough to offset asset losses totaling $321 billion.
The Milliman 100 Funding index's discount rate rose 242 basis points during 2022, ending at 5.22% as of Dec. 31 compared with 2.8% a year earlier.
"Exceptional discount rate hikes were the main driver of both plan asset and liability changes in 2022," said Zorast Wadia, principal and consulting actuary at Milliman and co-author of the pension funding index, in a news release Monday. "While massive investment losses across most asset classes made headlines in 2022, corporate pensions actually recorded major improvements in funded status given the reductions in plan liabilities, thus marking a year of significant improvement in the overall health of plans. The 110% year-end funding ratio marks the first funding surplus we've seen at year-end since just before the global financial crisis."
