U.S. corporate pension plan funding ratios fell slightly to 98.5% in 2023 due to falling discount rates, according to Milliman’s annual Corporate Pension Funding Study.

The study of the 100 U.S. public companies with the largest defined benefit plans showed that the average funding ratio fell from 99.4% a year earlier due to a 17-basis-point decline in the average discount rate to 5.01% from 5.18% at the end of 2022.

The study also showed that 48 of the top 100 plans have funding ratios of 100% or more, and no plan has a funding ratio below 75%.

The average rate of return assumption rose in 2023 to 6.4% at the end of 2023 from 5.8% a year earlier, reversing a decades-long trend of companies lowering their assumptions, Milliman said. However, the average rate of return assumptions are still well below the record-high average of 9.4% back in 2000.

Zorast Wadia, principal and consulting actuary at Milliman, said in an April 24 news release that funding ratio gains have already been made in the first quarter of 2024, and plan sponsors could follow the lead of International Business Machines Inc., Armonk, N.Y., which is reopening its frozen DB plan.

IBM announced in November it would eliminate its 401(k) corporate match and replace it with a cash balance component called a retirement benefit account, which is part of the IBM Personal Pension Plan, a defined benefit plan.

“Nearly half of the companies in our study are boasting funding surpluses, and about 35 of them have frozen U.S. pension plans with surplus funding as of FY2023 (including IBM),” Wadia said. “If these companies followed IBM’s lead and shifted their retirement spending strategies, it could free up $37.7 billion for shareholder or other business initiatives.”

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