The estimated funded status of the 100 largest U.S. public defined benefit pension plans rose to 102.9 per cent in April, up slightly from 102.7 per cent at the end of March, according to a new report by Milliman Inc.
It found an increase in discount rates shaved US$10 billion off liabilities and helped offset an average monthly return of negative 0.12 per cent. Plan sponsors’ asset value stood at $1.25 trillion, while the projected benefit obligation was $1.215 trillion.
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“The rise in discount rates, combined with a pause on tariffs, helped to improve the funded status for [plan sponsors] in April,” said Zorast Wadia, author of the report, in a press release. “While this helped to soften the blow from poor first-quarter returns, the funded ratio is still down for 2025 — and with continued fears of inflation, trade wars and rate cuts, pension risk management remains a top priority. Thankfully, plan sponsors with a pension surplus have many options to choose from.”
Under an optimistic forecast, in which interest rates rise to 5.97 per cent by the end of 2025 and 6.57 per cent by the end of 2026, as well as an average investment return of 10.53 per cent, the funded ratio would climb to 111 per cent by the end of 2025 and 125 per cent by the end of 2026.
Conversely, under a forecast in which the discount rate decreases to 5.17 per cent at the end of 2025 and 4.57 per cent by the end of 2026, along with average annual returns of 2.53 per cent, the funded ratio would decline to 97 per cent by the end of 2025 and 88 per cent by the end of 2026.
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