Largest 100 Corporate Pension Plans See Strong Increases in Funding Surplus

 

The largest U.S. corporate pension funds had a collective funding surplus last year for the first time since 2007, according to Milliman’s 2025 Corporate Pension Funding Study. Funding ratios of the Milliman 100 rose to 101.1% in fiscal year 2024, up from 98.5% in 2023.  

This is the first time these companies have had an average funding surplus since 2007, when that figure stood at 106%, before falling to 79% during the financial crisis of 2008 and 2009. In fiscal 24, the funding surplus rose to $13.8 billion, improving from a $19.9 billion deficit in 2023.  

Out of the 100 plans Milliman tracked, more than half are in surplus, with 12 plans reporting a funding ratio greater than 125%. Only one plan reported having a funding ratio of less than 80%. 

Plans with higher allocations to equities generally saw their funded statuses increase substantially. For example, Berkshire Hathaway had a 69% allocation to equities at the end of the fiscal year, and its plan saw its funding ratio increase to 121% in 2024 from 104.8% in 2023, says Milliman Principal Zorast Wadia, the report’s author.  

“I would venture to guess that companies that had the biggest allocations to equities likely did the best last year in terms of funded stats improvements,” Wadia says. 

According to the survey, corporate pensions with a fixed-income allocation of at least 50% had a 1.9% average investment return, compared with 4.3% for all other companies.  

Distribution by funded ratio

The Milliman 100 companies include the 100 largest public companies with defined benefit pension plans and a 2024 annual report available as of March 10. The plans collectively hold $1.26 trillion in assets.  

Total market value of assets ($ billions) 

 

Investment Returns and Asset Allocation  

The average plan in the Milliman 100 had a 3.6% return in 2024. These plans, typically using a liability-driven investing approach, are mostly allocated to fixed income, significantly reducing equity exposure over the years. 

It is also the first time since 2013 in which these 100 plans’ fixed-income allocations decreased, which Milliman attributed to weaker fixed-income performance relative to equities.  

The expected rate of return for the corporate plans considered in Milliman’s study also increased to 6.53% in 2024 from 6.42%. 

“The expected-rate-of-return-on-assets assumption generally has declined over the past two decades as plan sponsors move from equity investments into fixed income and take risk off the table,” Wadia says. 

But last year, plan sponsors were able to increase their rate-of-return assumptions due to portfolio diversification and stronger equity returns. For the sixth year in a row, equities outperformed fixed income; only 19 of the Milliman 100 companies exceeded their expected rate of return last year.  

“Some of these plans have re-risked, feeling the notion that interest rates are not ready to come back down yet,” Wadia says. “So they continue to hold equity holdings or are looking at alternative asset classes—private equity, commodities, real estate, hedge funds—looking to essentially increase their rates of return, and that’s why you saw this assumption go up slightly.” 

Asset allocation over time

Plan De-Risking  

As more corporate pension funds enter surplus territory, plan sponsors are considering what to do with their plans. According to Milliman, 36 companies in the study have a frozen pension plan with a surplus of assets.  

Pension risk transfer transactions, in which a plan sponsor offloads the responsibility of a plan’s liabilities to an insurer, are increasing in popularity. Plans in the Milliman 100 engaged in $23.4 billion of PRTs in 2024, up from $19.8 billion in 2023. But a PRT—while an option—is not always the best option for every plan, Wadia says. 

“I think there are more attractive options other than pension risk transfer, such as re-utilizing your defined benefit plan or reigniting accruals, shifting spending strategies from your defined contribution plan to your defined benefit plan,” Wadia says. “I think that could, overall, produce a significant savings for the plan sponsor.” 

Wadia also points to the increase in litigation attacking PRT transactions, in which plan participants have sued their plan sponsor, asserting that the transactions represent a breach of fiduciary duties and arguing that the selected insurer providing the deal’s annuities is not the safest provider.  

“I think that has created a bit of uncomfort or uncertainty in the PRT market, and so plan sponsors have to look at, again, their overall risk tolerance and what they have decided is best for their business continuity and also the best retirement vehicle for their employees and the best use of their retirement dollars,” Wadia says.

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