Strong investment returns drove pension assets higher than liabilities last month, Milliman revealed on September 8.
The funded status of defined benefit pension plans improved by $8 billion in August, doubling July’s $4 billion increase, according to the firm’s pension funding index. As of August 31, the funded ratio rose to 106.2% from 105.5% at July month end—marking five consecutive months of increase.
Discount rates, based on the FTSE Pension Liability Index, slipped during the month to 5.53% from 5.55%. In turn, the projected benefit obligation increased to $1.215 trillion from $1.213 trillion in July. However, the market value of plan assets rose by $10 billion, to $1.290 trillion from $1.280 on July 31.
“After strong investment performance, corporate pension plans moved further into surplus territory during August,” said Zorast Wadia, author of Millman’s PFI, in a statement. “However, with the expectation of rate cuts on the horizon, plan sponsors should take steps now to preserve funded status gains and institute prudent asset-liability management strategies.”
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L&G – Asset Management, America estimated the average funding ratio increased to 103.6% in August from 103.0% in July. Equity markets delivered positive performance with global equities rising 2.5% and the S&P 500 up 2% over the month. Plan discount rates were estimated to have decreased 13 basis points over the month, driven by the Treasury component falling 14 bps and the credit component widening 1 bps.
According to data from Wilshire, the aggregated funded ratio is estimated to have increased by 1.1 percentage points in August, landing at 102.2%. The change was driven by a 1.2-percentage-point increase in asset value and a 0.4-percentage-point increase in liability value. The ratio is estimated to have increased by 4.4% and 0.9% year-to-date and over the previous 12 months, respectively.
October Three Consulting stated that the hypothetical pension plans it tracks gained “modest ground” for the fifth consecutive month due to higher stock markets. All major indexes gained ground, and a diversified stock portfolio gained 3% last month—now up more than 13% for the year.
O3’s Plan A, a traditional 60/40 equity/bond allocation, gained more than 1% in August, up 5% for the year. The more conservative Plan B, comprised of 80% bonds, gained a fraction of 1% last month, ending August up 1% through the first two-thirds of the year, according to the firm.
Aon tracked the daily funded status for S&P 500 companies with DB pension plans. In August, the status was estimated to have increased to 101.8% from 101.4% in July. Pension assets increased by 1.2%, driven primarily by a 2.3% increase in U.S. equities and a 0.8% increase in long-duration corporate bonds.
The yield on the 10-year Treasury bond increased 14 bps, while the interest rate used to discount pension liabilities decreased by 3 bps for the average pension plan. The decrease in interest rates resulted in an increase in pension liability, which partially offset the positive effect of asset returns on funded status.
The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 1% to 109% in August from a rise in domestic equities, Mercer reported. Typical discount rates for pension plans, as measured by the Mercer Yield Curve, decreased to 5.55% from 5.57%.
Gallagher’s August 2025 U.S. Pension Briefing found discount rates were nearly flat in August, finishing at 5.66% (0.04% higher than month-end July) and equity markets brought positive returns for the fourth month in a row. Most plans saw modest improvements in funded status again in August.
Positive market returns came from a blend of strong corporate earnings, particularly in tech, along with easing bond-market conditions and rate-cut expectations, according to the company. Gallagher also noted that easing trade tensions improved investor sentiment.
“What remains to be seen is how the Fed will view the combination of solid GDP growth and persistent inflation against the backdrop of a slowly deteriorating labor market,” the report stated. “The other wild card factor is the pressure that the Fed is receiving from the White House to lower rates.”
Relates Stories:
Corporate Pensions See Funding Ratio Gains in July
Funded Status of U.S. Corporate Pension Plans Rose Again in June
Largest Corporate Pension Plans Add $22B in May
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