By: Russ Kamp, CEO, Ryan ALM, Inc.
The Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans, was recently released. It isn’t surprising that the average funded ratio advanced nicely during September given the dramatic rise in U.S. interest rates.
As a result, the funded status of the Milliman 100 PFI plans rose by $19 billion during September on the back of a 47 basis points (bps) rise in the discount rate, which now stands at 6.47%. This dramatic rise reduced pension liabilities by $54 billion. This reduction in the total liabilities offset investment returns that fell -2.2% for the month. According to Milliman, this challenging performance was the second-worst month of 2026, following the -3.19% return posted in March. The funded ratio for the index members is now at 114.5%, up more than 5% from 109.4% established at June 30, 2026.
“Despite losing $59 billion in market value during the third quarter, driven by quarterly returns of -2.92%, this performance was more than offset by a $105 billion reduction in plan liabilities, as discount rates rose 86 bps during the period,” said Zorast Wadia, PFI author. “Discount rates have not approached current levels since the 6.53% seen in May 2009, and the PFI funded ratio has not reached similar highs in more than 25 years.”
Given this dramatic improvement in funding, corporate defined benefit funds would be remiss to not seek to defease pension liabilities and secure that funding. As reported in the Ryan ALM, Inc. blog yesterday, we constructed a cash flow matching portfolio using high-quality investment-grade bonds (BBB+ or better) that produced a 6.5% YTM for the 30-year assignment. We are always willing to provide a free analysis of what CFM can do for your fund.
