By: Russ Kamp, CEO, Ryan ALM, Inc.
Like clockwork, Milliman has released its monthly Milliman 100 Pension Funding Index (PFI), that analyzes the 100 largest U.S. corporate pension plans, and for the first time in 11-months, the collective funded ratio for this cohort failed to advance.
Investment returns for the constituents in this index fell -3.33% causing assets for PFI members to collectively fall to $1.3 trillion. Unfortunately, a 32-basis-point increasein the discount rate was not enough to offset asset depreciation. The discount rate at 5.65% caused the present value of liabilities to fall to $1.2 trillion. As a result, the funded ratio marginally declined from 109.3% as of February 28, to 108.9%, as of March 31, 2026.
Despite the recent setback, the index showed a 0.7% improvement in the funded ratio which began 2026 at 108.2%. The 0.7% improvement resulted in a $6 billion funding improvement for the first quarter, as a 19-basis-point rise in the discount rate offset quarterly returns for the index constituents of -0.21%.
“March was the first month of funding level declines in almost a year,” said Zorast Wadia, PFI author. “While funding levels improved overall during the first quarter, it is uncertain how long these gains will last, given current volatility. Surplus management strategies focused on both sides of the balance sheet continue to be prudent.” We, at Ryan ALM, Inc., couldn’t agree more. A cash flow matching (CFM) strategy, designed to carefully match asset cash flows (bond interest and principal) with liability cash flows (benefits and expenses) would bring an element of certainty to the management of defined benefit plans. CFM provides all the liquidity to meet ongoing monthly obligations, while extending the investing horizon for the non-bonds. It also eliminates interest rate risk for that portion of the portfolio using CFM.
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