The funded status of the 100 largest US corporate defined benefit pension plans improved by $23 billion during April 2026, lifting the funded ratio from 105.9% at the end of March to 107.8% at the end of April - the highest mark recorded since October 2007, when it stood at 108.1%, according to Milliman's monthly Pension Funding Index (PFI) published on 12 May 2026.
Plan assets rose $20 billion to $1.297 trillion, driven by monthly investment returns of 2.13%. Projected benefit obligations fell to $1.204 trillion as the monthly discount rate edged up one basis point to 5.66%. The aggregate funding surplus across the 100 plans reached $94 billion - the largest surplus since before the Global Financial Crisis.
"After a flat first quarter, the funding surplus grew to $94 billion at the end of April, primarily due to strong market returns. This means plan sponsors continue to have more pension risk management options as plans move further into surplus territory."
- Zorast Wadia, Author, Milliman 100 Pension Funding Index, May 2026What drove the improvement
The April result reversed a difficult Q1, during which PFI plan assets declined by $20 billion as geopolitical uncertainty and Iran-war-related market volatility weighed on returns. The funded ratio had dipped to 105.9% at end-March before April's strong equity and credit market performance restored momentum. Over the trailing 12 months from May 2025 to April 2026, the cumulative asset return for these pensions has been 11.31%, and the funded status position has improved by $67 billion.
The risk management window
With the funded ratio at its highest level since 2007, plan sponsors face a genuine strategic decision about what to do with the surplus. Milliman identifies three broad options: de-risking by shifting assets from equities to bonds to lock in the surplus, maintaining the current asset allocation and riding further potential upside, or extracting surplus capital to return value to the corporate sponsor where plan documents permit.
For plan sponsors and their investment committees, a funded ratio above 107% represents one of the strongest de-risking windows seen in 15 years. Liability-driven investment strategies that shift duration exposure toward long-dated investment-grade bonds can lock in a meaningful proportion of the current surplus at relatively attractive yield levels. The risk to waiting is that equity market volatility - already elevated by the Iran conflict and AI sector uncertainty - could compress the funded ratio quickly, closing the window before action is taken.
What this means for institutional portfolio management
The improvement in corporate DB funded status has direct implications for how plan sponsors approach the investment portfolio in the second half of 2026. The combination of a high funded ratio, elevated discount rates and uncertainty in both equity markets and the interest rate path creates a set of portfolio construction decisions that are uncommon in the modern era of DB pension management.
- Duration management becomes the central question. At 5.66%, discount rates are high relative to the post-2008 period. If rates fall - which several scenarios involve - liability values will rise, compressing the funded ratio even if assets hold steady. Locking in duration exposure to match liability sensitivity is the logical response to a well-funded plan at elevated rates.
- Alternatives provide downside protection. For plan sponsors choosing to maintain equity-like risk in the asset portfolio, the allocation to alternatives - particularly hedge fund strategies with low equity correlation - provides meaningful protection against the funded ratio volatility that would result from a sharp equity drawdown in an Iran-conflict or AI-sector-correction scenario.
- Monitoring needs to be continuous, not quarterly. The April improvement came after a Q1 setback and before further Iran-conflict market impact. A funded ratio of 107.8% can move materially within a single quarter. The plan sponsors with the best outcomes will be those monitoring funded status continuously against their glide path triggers, not those reviewing it at quarterly investment committee meetings.
AlternativeSoft provides pension fund investment teams and their consultants with multi-asset portfolio analytics, scenario modelling tools and alternatives research capabilities to monitor funded status continuously and manage the asset portfolio against defined glide path triggers - across public equity, fixed income, alternatives and private markets within a single integrated analytical framework.