U.S. corporate pension funding ratios suffered their largest monthly drop of 2024 in August after falling discount rates caused liabilities to rise, 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 fell to 102.8% as of Aug. 31, down from 103.6% at the end of July.
Despite positive market returns during August — Milliman estimated an investment gain of 1.8% during the month — the fall in discount rates to 5.1% at the end of August from 5.3% the previous month led to the estimated decline in funding ratios.
"August's funded ratio drop was the largest monthly decline of 2024," said Zorast Wadia, principal and consulting actuary at Milliman and author of the pension funding index, in a Sept. 10 news release. "As in July, both assets and liabilities increased during the month, but investment gains weren't enough to offset liability increases. With markets falling from all-time highs and discount rates starting to show declines, pension funded status volatility is likely in the months ahead, underscoring the prudence of asset-liability matching strategies for plan sponsors."
While the estimated market value of plan assets gained $17 billion to finish August at $1.347 trillion, the drop in discount rates caused liabilities to rise by $27 billion to finish the month at $1.31 trillion.
Milliman’s estimate for August stood in contrast to similar estimates by Wilshire Advisors and Legal & General Investment Management America that said funding ratios rose in August.
