Roaring equity markets fueled an April rebound for pension fund sponsors after the onset of war in the Middle East had rocked stock markets in March and had taken the funded levels of U.S. corporate defined benefit pensions down a notch.
The funded status of the 100 largest U.S. corporate defined benefit plans increased from 105.9% at the end of March to 107.8% at the end of April, the highest mark observed since October 2007—when the figure was 108.1%, according to Milliman’s Pension Funding Index.
“2025 turned out to be a really good year for pensions, both from market gains and discount rates remaining relatively high,” says Zorast Wadia, a principal at Milliman and author of his firm’s PFI. “So far in 2026, it’s been a different story. We started off the year with some gains, then we gave it all back in March and started from scratch.”
Wadia says April was “all about investments,” while discount rates were a lesser part of the equation—despite remaining relatively high. But with uncertainty about how future relations between the U.S. and Iran will unfold and considering the trajectory of discount rates, pension sponsors should not assume April’s gains are assured for the rest of the year.
“The good news is: So far in May, we’re seeing more of the same,” says Matt McDaniel, a partner in Mercer’s wealth practice. “But there is risk on the downside. If we have a [market] correction, if folks start looking at equity markets and say, ‘These valuations are really rich,’ if political tensions and military activity [in Iran] escalate again—all of these things could weigh in on markets and send them down in a hurry.”
McDaniel says while underfunded plans might benefit from investing heavily in equities and taking on risk to close their funding gap, overfunded plans might be inclined to take a little more risk off the table, move into fixed income and “bank their gains.”
Tracking the Gains
Mercer’s analysis found the funding levels of pension funds sponsored by companies in the S&P 1500 increased by 4 percentage points in April to 108%, stemming from an increase in equity markets and a slight increase in discount rates.
Both model plans tracked by October Three Consulting gained ground in April. Plan A, a traditional 60/40 equity/bond allocation, improved 6 percentage points last month, while the more conservative Plan B, comprised of 80% bonds, moved up 2 percentage points in April.
Stocks gained “substantial ground across the board” last month, October Three reported. The five major U.S. stock indexes the company tracked—which include U.S. and international equities—posted overwhelmingly positive returns. A diversified stock portfolio gained 10% during April, ending the month up 8% for the year.
MetLife estimated that the average U.S. corporate pension funded status rose to 106.6% last month, up 1.7 percentage points from 104.9% in March—driven primarily by allocations to equities and alternative investments.
Aon, which tracked the daily funded status of pension funds of S&P 500 companies, estimated the funding ratio increased to 105.3% in April from 103.3% in March. Pension asset valuations increased by 2.6 percentage points during the month, driven largely by a 10.2-percentage-point increase in U.S. equities, per the Russell 3000 Index.
In its monthly review, L&G Asset Management, America estimated that the average funding ratio climbed to 108.5% in April from 104.7% in March. Discount rates edged down 1 basis point over the month, as a 6-bps Treasury component rise was offset by 7-bps-tighter spreads in credit investments.
Gallagher found discount rates remained mostly flat in April, ending the month at 5.79%, up 0.03 percentage points from the end of March.
Wilshire’s pension finance monitor estimated that the aggregate corporate pension funding ratio increased by 4 percentage points in April, ending the month at 108%.
“April’s funded status surged during the month, driven by the Wilshire 5000 Index posting its best monthly return since November 2020,” said Ned McGuire, Wilshire’s managing director, in a statement. “Most asset classes delivered positive returns, supported by a strong reacceleration in corporate earnings and continued momentum in the [artificial intelligence] sector and related areas.”
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Tags: corporate pensions