The Pension Market

Corporate Pension Performance For FY 2020 Improves Slightly Over FY 2019

At 88.4% funded, experience nearly matching growth in both assets and liabilities in 2020

Milliman’s 2021 Corporate Pension Funding study reflects ‘better than expected investment returns.’ Read the full survey here.

SEATTLE, April 7, 2021 /PRNewswire/ — Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its 2021 Corporate Pension Funding Study (PFS), which analyzes the 100 largest U.S. corporate pension plans. This marks the 21st consecutive year in which the report has been published.

In 2020, despite a 67-basis-point decline in the discount rate, the funded ratio for the Milliman 100 plans climbed slightly, from 87.5% at fiscal year-end (FYE) 2019 to 88.4% at FYE 2020. The year-over-year improvement was the result of better-than-expected investment returns of 13.4%, leading to a PFS all-time-high in the market value of assets, at $1.77 trillion. After accounting for contributions and benefit payments including settlements, the total asset growth for the year was 9%.

Corporate Pensions Demonstrated Their Resilience In 2020 Amidst A Turbulent Year

However, this improvement in plan assets was offset by an 8% growth in pension liabilities, with the discount rate dropping from 3.08% at FYE 2019 to 2.41% at FYE 2020. This marks the first time in the 21-year history of the PFS that the discount rate has dropped below 3.00%. Other items of interest from the 2021 PFS include:

  • Pension expense (the charge to the income statement under Accounting Standards Codification Subtopic 715) decreased to $17.7 billion in FY 2020 from $26.1 billion in FY2019.
  • 19 plans had a funded ratio of at least 100% compared to 14 plans from the 2020 Milliman PFS.
  • Among the Milliman 100 pension plans, settlement payouts totaled an estimated $15.8 billion in FY 2020, up from the $13.5 billion in FY 2019.
  • Average return on asset expectations for FY 2020 were lowered to 6.2% per year from 6.5% per year for FY 2019. This was the largest annual drop in return expectations experienced over the last decade.

“Corporate pensions demonstrated their resilience in 2020 amidst a turbulent year of market volatility, declining discount rates, and employer stressors,” says Zorast Wadia, co-author of Milliman’s Pension Funding Study. “With a possible end in sight to the pandemic, and funding relief such as the CARES Act and now the American Rescue Plan Act of 2021, the outlook for these plans is much better than it was twelve months ago.”

Excerpts from the 2021 Corporate Pension Funding Study:

The 2021 edition of the Milliman Corporate Pension Funding Study (PFS) is our 21st annual analysis of the financial disclosures of the 100 U.S. public companies sponsoring the largest defined benefit (DB) pension plans. These 100 companies are ranked highest to lowest by the value of their pension assets that are reported to the public as of the end of fiscal year 2020, to shareholders, and to the U.S. federal agencies that have an interest in such disclosures.

A year prior, in our 2020 PFS, we began this report with, “Looking back to 2019 in April 2020 may seem irrelevant since we are dealing with the global pandemic’s horror and destruction to the health, jobs, businesses and financial assets of everyone.” As we open the 2021 PFS, we are even more aware of the magnitude of the destruction and efforts to overcome the human and financial toll from the pandemic.

Corporate pensions demonstrated their resilience in 2020 amidst a turbulent year of market volatility, declining discount rates, and employer stressors...

Recently, Congress passed and President Biden signed the American Rescue Plan Act of 2021 (ARPA-21). In doing so, the single-employer defined benefit plans that comprise our PFS were offered additional contribution relief that had begun with the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. This relief comes in the form of a reduction in the minimum required contributions by artificially increasing the discount rates for the actuarial calculations and allowing any pension deficit to be amortized over 15 years instead of seven years. It is unknown at this time how many of the Milliman 100 companies will elect to implement some of the early-adoption changes that would reduce their minimum required cash contributions.

Better Than Expected Gains

Pension funds saw a second consecutive year of better-than-expected investment gains, returning 13.4% in 2020 compared to 17.2% in 2019. The 2020 gains increased plan assets by $212 billion compared to the expectation that investments would increase by only $95 billion, based on the companies’ long-term investment return assumptions.

The Milliman 100 plans’ assets increased to an all-time high of $1.77 trillion in 2020 from $1.62 trillion in 2019. It is worth noting that, over the 12-year period from 2009 to 2020, there were only three years of adverse investment performance where returns were less than the expected return assumption. In 2011, the average return was slightly less than expected, in 2015, the average return was near zero, and in 2018, the average return was negative.

Equities ‘Long Duration Qualities’

For the second consecutive year, equities flaunted their long duration qualities and keep pace with surging pension liabilities. For calendar fiscal year plans, the average discount rate fell by 70 basis points during 2020. We estimate that their pension liabilities increased approximately 13% on an economic basis (due to the passage of time and changes to discount rates, ignoring benefit payments and accruals).

Plans with significant allocations to fixed income as part of a liability driven investment (LDI) strategy typically have allocations to long-duration high-quality bonds. During 2020 these bonds earned returns of 13% or more—closely tracking the increase in pension liabilities. Surprisingly, equities, especially U.S. equities, performed even better and also outperformed pension liabilities. Core fixed income produced strong returns but not enough to keep up with the liabilities of most plans.

Rates of return earned in 2020 for the 85 companies sponsoring pension plans with calendar fiscal years ranged from 9.2% to 25.6%, with an average of 13.8%. Returns mostly fell in the 10.0% to 18.0% range (78 plans), with four plans earning returns below 10.0% and three plans earning returns above 18.0%. Generally, plans with greater allocations to equities earned higher returns.

The 19 plans with equity allocations of at least 50% earned an average return of 15.3% while the 22 plans with equity allocations below 25% earned an average return of 12.6%. The rate of return earned by the plan sponsor with the highest allocation to equities (72.6%) was 17.0%, which was better than the return of 12.4% for the plan sponsor with the lowest allocation to equities (4.7%) in 2020.




About Milliman
Milliman is among the world’s largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information visit