Corporate pension plans over the past year have seen their funding surpluses increase significantly, as strong market returns and heightened interest rates consistently improved the health of corporate pension finances.  

However, in February, corporate pension funding ratios declined, a result of both weak equity returns and an increase in the value of pension plan liabilities, breaking a three-to-four-month streak of month-over-month increases. 

Funded Status Declines 

Investment consultant Wilshire estimated that the funded status of corporate U.S. pension plans in the S&P 500 Index declined by 1.1% in the month of February, to 104% from 105.1%. Liability values increased by 2.5% but were offset by a 1.4% increase in the value of assets. 

“February’s funded status declined due to an increase in the liability value,” said Ned McGuire, a managing director at Wilshire, in a statement. “Corporate bond yields, which are used to value corporate pension liabilities, fell by nearly 25 basis points—the largest monthly decrease since December 2023. This drop occurred as consumer confidence experienced its largest monthly decline since August 2021.” 

According to Milliman, the largest 100 corporate pension plans in the U.S. saw their funding ratios decline month over month to 104.8% from 106%. Positive returns for fixed income resulted in a 1.9% investment gain during the month but were offset by an increase in pension liabilities. 

According to Milliman, while pension assets increased by $18 billion, a decline in monthly discount rates to 5.36% at the end of February from 5.60% at the end of January resulted in a $13 billion decline in pension surpluses.  

“Gains in fixed income investments helped shore up the Milliman 100 pension assets but were not strong enough to counter the sharp discount rate decline,” said Zorast Wadia, a Milliman principal and consulting actuary, in a statement, noting that plan sponsors with prudent asset-liability matching strategies will be able to preserve the funded status improvements they have made.  

According to October Three Consulting, pension finances suffered their worst monthly loss since 2022, a result of both poor equity returns and lower interest rates. According to October Three, pension plans with a 60/40 portfolio saw their funding ratio fall to almost 99% from almost 102%.  

Plans with an 80% allocation to fixed income saw their funding ratios fall to between 99% and 100% from a range between 100% and 101%.  

LGIM America’s monthly Pension Solutions Monitor noted that pension funding ratios, benchmarked by a 50/50 portfolio, fell to 112.6% in February from 115.5% in January. 

According to WTW, the WTW Pension Index, which tracks the health of a hypothetical 60/40 portfolio, funding ratio decreased 3.5% in February to an index level of 120.2. 

Weak Market Returns 

In February, the S&P 500 fell 1.3%, the Nasdaq Composite Index fell 3.9% and the Russell 2000 Index fell 5.4%, according to October Three. The MSCI EAFE index and the MSCI EM index gained 3.0% and 1.0%, respectively, resulting in a diversified portfolio return of negative 1.2%. 

Interest rates used to discount pension liabilities fell more than 0.25% in February, resulting in stronger bond returns so far this year. 

“Corporate bond yields declined 0.25% in February after a flat January,” October Three noted. “As a result, pension liabilities have grown 3%-4% through the first two months of 2025, with long duration plans seeing the largest increases.”  

In February, though, discount rates used to value pension liabilities fell 0.2%, resulting in a modest dent in pension finances during the month, according to October Three, which expects plan sponsors to use discount rates in the 5.1% to 5.4% range to measure pension liabilities.  

“While U.S. equities saw a pullback, as reflected by a nearly [two] percentage point monthly decline in the FT Wilshire5000 Index, most other asset classes experienced positive returns, leading to an increase in total asset value month-over-month,” McGuire said in a statement.  

According to WTW, a 60/40 portfolio returned 0% in February, while portfolios with 20% fixed income returned negative 0.7%, and portfolios with a 60% long-duration fixed-income allocation returned 0.6%. Portfolios with 80% long-duration fixed income returned 3%.  

Related Stories: 

US Stocks Fall After Tariff Announcement 

U.S. Corporate Pension Funds Ended 2024 Strong 

Corporate Pensions Continue Funding Surplus Rise in January 

Tags: LGIM America, Milliman, Ned McGuire, October Three Consulting, Wilshire, WTW, Zorast Wadia