As corporate pension plans move further past the fully funded mark, some plan sponsors are changing their approaches to de-risking.
The funding ratios of the 100 largest U.S. corporate pension funds rose to 103.8% in fiscal 2025, up from 101.1% one year earlier, according to Milliman’s 2026 Corporate Pension Funding Study, released in April. The funds’ collective surpluses rose to $48.1 billion from $13.4 billion in 2024.
Pension funding averages reached surplus territory in fiscal 2024 for the first time since 2007—when funding stood at 106%, before falling to 79% during the financial crisis of 2008 and 2009.
The last time U.S. corporate pension plans recorded pension “income,” rather than “expense,” was prior to the burst of the dot-com bubble, says Milliman Principal Zorast Wadia, the report’s author. Pension “expense” remained an income statement credit in fiscal 2025, joining fiscal 2024, 2022 and 2021 as the only years with pension income since 2002.
To make the most of their record surpluses, plan sponsors are likely to consider not only conducting traditional pension risk transfers, but also integrating their pension and corporate financial management; using the surplus to fund new benefit designs; or using it to support business strategy, according to J.P. Morgan Asset Management’s “2026 Corporate Pension Peer Analysis.”
Diversification Matters
According to BlackRock’s “Corporate Pension Themes Report,” corporate pension funding ratios rose to 108% in fiscal 2025, up from approximately 87% in 2018.
Meanwhile, the average funded ratio of 21 companies with pension liabilities exceeding $20 billion grew to 98.6% in fiscal 2025, up from 96.4% in 2024 and the highest level since 2007, according to Russell Investments’ “$20 Billion Club: 2026 Update.” The corporations’ funding deficits fell to $16 billion from $29 billion the year prior.
JPMAM reported that 60% of the largest U.S. corporate pension plans—measured by assets—were overfunded in 2025, with a combined surplus of more than $85 billion. The average funded status among all 21 plans was 104.1%, up 3 percentage points from the year before. The average funded status of an underfunded pension plan was 92.4%, while the average for a plan in surplus was 119.6%.
In fiscal 2024, overfunded plans grew their surpluses while underfunded plans stagnated, but the disparity narrowed in 2025, according to the J.P. Morgan report. The sponsors of underfunded plans contributed more and closed the investment performance gap relative to their overfunded peers. Still, underfunded plans—particularly those with conservative glide paths and large hedge portfolios—faced headwinds inherent with being in a deficit position.
Some companies with underfunded pensions chose to re-risk their asset allocations by shifting from traditional hedge assets to diversified, return-seeking strategies. For example, the Coca Cola Co. reduced the fixed-income target for its U.S. plan in fiscal 2025 to 37% from 47%, reallocating to public equities an 8% allocation that had been committed to long-duration bonds and a 2% allocation from multi-strategy.
Justin Owens, Russell’s senior director and co-head of total solutions, and the author of that firm’s report, says plan sponsors with diversified portfolios were “rewarded” last year.
U.S. large-cap public equity returns were strong in 2025—up nearly 18%, per the FTSE Russell 1000 index—but non-U.S. equity returns reached more than 30%, according to the performance of the MSCI World ex-U.S. Index.
“Almost all U.S. plan sponsors saw improvements in funded status, and the ones that saw the greatest improvement were those that had large allocations to equities,” Owens says. “Companies that had at least 40% to 50% in equities, particularly with allocations to non-U.S. equities, tended to perform better.”
According to Milliman’s study, as in fiscal 2024, plans with higher allocations to equities enjoyed higher investment returns in 2025. The 10 plans with equity allocations of at least 50% earned an average return of 10.13%, while the 21 plans with equity allocations less than 15% earned an average return of 7.98%. Energy company Public Service Enterprise Group Inc., with a 69% allocation to equities, had the highest investment return of any of the calendar-year fiscal year companies in Milliman’s study, at 15.26%.
2026 and Beyond
As more corporate pension funds enter surplus territory, plan sponsors are considering what to do with their plans. Out of the 100 plans Milliman tracked in 2025, more than half are in surplus, with 13 plans reporting a funding ratio greater than 125%. None of the tracked plans reported a funded ratio of less than 80%.
The average plan in the Milliman 100 had an 8.8% return in 2025. The average expected rate of return for the corporate plans considered in Milliman’ study increased to 6.61% in 2025 from 6.54% in 2024.
Sponsors are “looking at other means [to de-risk] besides pension risk transfers, and their plans are getting healthier,” Wadia says.
According to JPMAM’s report, “timely contributions, delivered into undervalued markets, can have a material impact on funded statuses when they compound over time.” However, contributions “rarely arrive at the most opportune moments,” making the case for greater integration of pension strategy across capital structure, capital allocation and human resources, the report stated.
In addition to integrating pension and corporate financial management, the report noted that surplus assets can also be used to fund new benefit designs, support business strategy, and enable mergers and acquisitions.
Pension settlement payouts totaled an estimated $12.6 billion in fiscal 2025, down from $23.4 billion in 2024, according to Milliman’s report. Last year’s transactions primarily consisted of annuity purchases and lump sum windows.
Russell’s Owens says that while traditional buyouts lagged last year, there was an uptick in buy-in transactions: deals in which a pension sponsor purchases an annuity to pay ongoing pension liabilities, but the liability and the offsetting annuity contract remain on the employer’s balance sheet. Buy-ins can also cover nonretirees who will be offered a lump sum payout prior to plan termination.
JPMAM reported U.S. buy-ins reached record transaction volumes in 2025, totaling $17 billion across 17 deals. Lockheed Martin Corp. held two buy-in contracts, originally entered into in 2018 and 2020, which were converted to buyouts last year.
Transocean, Pitney Bowes and Fortune Brands all transferred most of their plan assets via buy-ins last year, according to JPMAM’s report. Pitney Bowes recently disclosed approval of a plan termination for 2026, and JPMAM expects more firms to follow suit, the report stated.
Meanwhile, Russell reported that lawsuits related to annuity purchases likely dampened risk transfer activity last year.
AT&T and General Electric Co. were each sued in 2024 for breaches of fiduciary duty involving pension risk transfers, but the cases against them were dismissed last year. A lawsuit filed against Lockheed Martin was permitted to proceed in April 2025, and the Department of Labor joined the case on appeal early this year, siding with the company. In addition, IBM was sued in October 2025, a case which is pending.
Milliman’s Wadia attributed the overall decrease in PRT activity to the exhaustion of PRT opportunities among plan sponsors, as well as additional risk management options that became available with greater pension funding levels.
“With higher funded ratios, we may see a split among plan sponsors, with some further de-risking their investments to lock in positive funded statuses, while others take advantage of the cushion surplus funding provides to seek higher returns,” Milliman’s report stated. “This could include an effort among plan sponsors to shorten their liability durations given that interest rates are still relatively high and that there’s uncertainty ahead.”
Legislatively, Wadia and Owens suggested plan sponsors may benefit from a proposed bill that would create additional options for the use of defined benefit and retiree health plan surpluses. The Strengthening Benefit Plans Act of 2025, introduced by Senator Tim Scott, R-South Carolina, on June 10, 2025, would allow DB plan sponsors to use surplus plan assets to fund defined contribution plans. The bill was referred to the Senate Committee on Finance, but has not yet advanced.
“[The bill] would be a game changer for plan sponsors who have both DB and DC plans,” Wadia says. “It would give [them] more of an incentive to hold onto their DB plan and continue to utilize it.”
JPMAM estimated in its report that the 100 largest plans, in aggregate, have $62 billion in eligible surplus, defined as excess beyond 110% funded on a Pension Benefit Guaranty Corporation basis. That figure equates to 450 years’ worth of DC contributions, the report stated.
Tags: BlackRock, Corporate pension funding, JPMAM, Milliman 100 Pension Funding Index, Pension Risk Transfer, Russell Investments, Zorast Wadia