March Market Losses Drive Down Corporate Pension Funding, Quarter Still Strong

The funded status of the largest 100 corporate defined benefit pension funds dropped to 108.9% on March 31 from 109.3% at the end of February, but a decrease in liabilities mostly compensated for a decline in assets, according to Milliman’s Pension Funding Index.

While consulting firms across the board reported hits to pension funding in March, Milliman’s PFI funded status still improved by $6 billion in the first quarter of the year. War in the Middle East rocked the stock market last month, after the U.S. and Israel attacked Iran on February 28, but the news for pension sponsors may not be so bad.

“If you zoom out and put the volatility in context, it’s nice that we’ve been resiliently in overfunded status for a long time,” says Jeff Passmore, MetLife Investment Management’s liability-driven-investing-solutions strategist and co-author of his firm’s monthly pension funding report.

MetLife’s report showed that over the past decade, the funded status of U.S. corporate pension funds was lowest on June 27, 2016, at 74.7%, and peaked on January 29, this year, at 107.2%. The status has hovered near the fully funded level since 2021.

“When we saw the market losses [last month], we were expecting pension funding statuses would probably take a bigger hit,” Passmore says. “It may turn out that that end of March was kind of just a shock that worked its way through the system and we recovered.”

On April 15, both the S&P 500 and the Nasdaq indexes closed at record-high levels, having recovered all the losses they experienced since the start of the war.

A Tempered Decline

MetLife estimated that the average U.S. corporate pension funded status fell to 104.9% last month, down from 105.3% in February. The decline was driven primarily by asset losses across both equities and fixed income, though a rise in discount rates during the month helped offset some of the drop.

Mercer’s analysis found the funding level of pension funds sponsored by companies in the S&P 1500 fell 3 percentage points in March to 104%, resulting from a decrease in equity returns, partially offset by an increase in discount rates.

Aon, which tracked the daily funded status of pension funds of S&P 500 companies, estimated the funding ratio decreased to 103.6% in March from 104.5% in February. Pension assets decreased by 4.1 percentage points during the month, driven largely by a 5-percentage-point decrease in U.S. equities, per the Russell 3000 Index, and a 3.3-percentage-point decrease in long-duration corporate bonds, based on the Bloomberg Long Credit Index. In Q1 overall, however, the aggregate pension funding status increased to 103.6% from 103.2% in Q4 2025.

In its monthly review, L&G Asset Management, America estimated that the average funding ratio decreased throughout March and finished the month at 104.7%, down from 107.3% in February. Global equities were down 7.1%, and the S&P 500 Index dropped 5%. Discount rates were estimated to have increased 38 basis points over the month, as the Treasury component rose 35 bps, and credit spreads widened by 3 bps.

Wilshire’s pension finance monitor estimated that the aggregate corporate pension funding ratio decreased by 1.5 percentage points in March, to 104% at month-end.

Gallagher found discount rates rose sharply throughout March, to 5.76%, up 0.26 percentage points from the end of February.

Both model plans tracked by October Three Consulting lost ground in March. Plan A, a traditional 60/40 equity/bond allocation, lost 1 percentage point last month, as did the more conservative Plan B, comprised of 80% bonds. However, interest rates jumped 0.30% during March, cushioning asset losses.

Will the Offsetting Continue?

Brian Donohue, a partner in October Three, says pension sponsors may wonder whether the offsetting effect will continue if stocks go down further in the future than they did in March. While Donohue does not expect interest rates to necessarily drop if stocks go down, he says it is not a scenario that can be ruled out. During the 2000 “dot-com bubble burst,” for instance, stocks and interest rates moved down together.

However, if interest rates moved higher while stock prices fell, Donohue says the counterbalancing effect could continue. He points to 2022 as an example: Major U.S. equity indexes posted their worst annual performance that year since the global financial crisis of 2008, but for pension plans, the drop was offset by higher interest rates, making it a “very manageable year.”

“So far in 2026, the volatility we’ve seen in markets has not been a big deal for pension sponsors,” Donohue says. “In the … events [category] … if the [Iran] ceasefire holds, we could be in more of a smooth-sailing scenario already.”