Corporate Pensions See Funding Ratio Gains in July

U.S. corporate pension funding continued its upward trajectory in July, as an increase in corporate bond yields drove down plan liabilities.

The funded status of the 100 largest corporate defined benefit pension plans rose by $4 billion, according to Milliman. The funded ratio of DB plans increased to 105.7% from 105.3% at the end of June, largely due to a $6 billion decrease in liabilities.

The market value of assets actually fell in July, to $1.282 trillion from $1.284 trillion in June. The projected benefit obligation decreased in July to $1.213 trillion, reflecting a three-basis-point increase in the monthly discount rate, to 5.55% in July from 5.52% in June. Milliman’s discount rate valuation is based on the FTSE Pension Liability Index, a high-quality corporate bond yield curve.

“On the asset side, July had a modest return month,” says Zorast Wadia, author of Milliman’s pension funding index. “You had liabilities dropping and assets dropping—but liabilities dropping more.”

L&G – Asset Management, America reported pension funding ratios increased to 114.8% from 114.3% last month. Plan assets with a traditional 50/50 stock/bond allocation increased 0.5%, while liabilities remained relatively unchanged. Plan discount rates were estimated to have increased 6 basis points over the month, driven by the Treasury component rising 12 bps and the credit component tightening 6 bps.

October Three Consulting found modest increases in the two theoretical plans it tracks. Plan A, the traditional 60/40 equity/bond allocation, gained 1% in July, up 4% for the year. The more conservative Plan B, with 80% in bonds, gained a fraction of 1% last month, ending the month up less than 1% for the first seven months of 2025, according to the firm.

Aon tracked the daily funded status for S&P 500 companies with DB plans. The firm estimated that the S&P 500 aggregate pension funded status increased in July to 101.4% from 101.2% in June. Pension assets rose slightly—by 0.2%—driven mainly by a 2.2% increase in U.S. equities and no change in long-duration corporate bonds.

According to Aon, the yield on the 10-year Treasury bond increased 13 bps last month, while the interest rates used to discount pension liabilities increased by 5 bps for the average pension plan. The increase in interest rates resulted in a decrease in pension liabilities, compounding the positive effect of asset returns on the funded status.

The estimated funding level of pension plans sponsored by S&P 1500 companies increased to 108% in July from 107% in June, powered by an increase in discount rates and domestic equities, according to Mercer. Aggregate surpluses increased to $116 billion in July from $114 billion in June.

Gallagher’s July 2025 U.S. Pension Briefing stated most plans saw modest improvements in funded status during the month, as the Federal Reserve held rates steady during its July meeting. The firm stated there is a high likelihood of a federal interest rate cut in September.

Discount rates increased 0.04% from June, finishing at 5.62%. The rates reached where they had been in April, matching the second highest point of 2025, Gallagher reported.

Wilshire estimated that the aggregate funded ratio for U.S. corporate pension plans increased by 0.5 percentage points in July, ending the month at 101.1%. The change was driven by a 0.5-percentage-point decrease in liability value, while asset value remained unchanged.

Although Wilshire estimated the funding ratio to have decreased by 0.8% over the last year, it is estimated to have dropped by 3.3% year to date.

Milliman’s Wadia looked at the overall picture: As U.S. companies continue to develop surplus assets in their pension funds, plan sponsors have more options with respect to plan design.

“July marks four straight months of funding improvement, with levels not seen since late 2007, before the global financial crisis,” Wadia said in a statement. “In order to preserve funded status gains, plan sponsors should be thinking about asset-liability management strategies to help mitigate potential discount rate declines in the future.”

This week, the Eastman Kodak Co., in its second quarter earnings report, announced it is looking at using a pension reversion transaction to access surplus pension assets to pay down debt and avoid insolvency.

Related Stories:

Kodak Seeks Pension Reversion Proceeds to Pay Down Debt, Avoid Insolvency

Funded Status of U.S. Corporate Pension Plans Rose Again in June

How to Evaluate the Options for a Corporate Pension Plan in Surplus

Tags: corporate pensions, Zorast Wadia