U.S. corporate pension funds continued to recover in May, as higher bond yields drove down plan liabilities, and pension assets increased.
The funded status of the 100 largest corporate defined benefit pension plans increased by nearly $22 billion in May, according to Milliman. The funded ratio of the DB plans rose to 104.9% from 103%. The increase erased the losses from a rocky first quarter of the year, bringing the funded status above 103.6%, where it started 2025.
Pensions assets increased in May, as the market value of plan assets grew $2 billion thanks to a 0.68% investment return. Pension liabilities fell by $19 billion to $1.195 trillion, resulting from monthly discount rates increasing to 5.71%, up from 5.57% in April.
The increase in discount rates and rise in equities propelled the funded status of pension plans sponsored by S&P 1500 companies to 107% in May, a three-percentage point increase month-over-month, according to Mercer. In May, aggregate surpluses increased to $102 billion from $55 billion in April.
For more stories like this, sign up for the CIO Alert newsletter. ?
U.S. equities performed much better in May, with the S&P 500 index up 6.15% and the Dow Jones Industrial Average index climbing 3.94%, according to S&P Global. The strong returns carried the S&P into positive territory for the year to date, while the Dow remained slightly in the red year to date.
Additionally, all-cap U.S. equities rose 6.34% in May, with technology, communication services and consumer discretionary gaining 10.89%, 9.63% and 9.44%, respectively, according to Gallagher.
“Equities rose significantly in May in response to a temporary pause on certain tariffs, and interest rates also increased slightly due to lingering inflation, as the Fed continues to hold the central rate steady,” said Matt McDaniel, a partner in Mercer’s wealth practice, in a statement.
WTW’s pension index rose for the second month in a row, as assets and discount rates increased. The index rose to 124.7 in May, up from 119.3 in April, a 4.6% increase.
Treasury yields increased during the month, with the 10-year yield rising to 4.41% and 30-year yield hitting 4.92%, causing higher pension discount rates and lower liabilities, according to NEPC.
Wilshire reported that aggregate funded ratios for U.S. corporate pension plans rose 2.6 percentage points in May, ending the month at 100.2%.
L&G’s Pension Solutions Monitor estimated that pension funding ratios increased to113% from 110.2%.
According to October Three Consulting, a traditional 60/40 equities-to-bonds portfolio gained 4% in May to about 101.5%, while a conservative 20/80 portfolio gained 1% to reach about 100% funded.
Despite a favorable May erasing the doldrums of Q1, the U.S. is still negotiating trade agreements, and Republican members of Congress have yet to finalize their sweeping tax bill that includes several policy changes which could continue 2025’s market volatility.
“As the market continues to process policy changes, volatility could continue, and plan sponsors should be prepared for continued uncertainty in the markets,” McDaniel said.
Tags: Funded Status, Pensions
#Largest #Corporate #Pension #Plans #Add #billion