Global Valuation, Accounting & Tax: 2026 US Corporate Pensions

Research evidence excerpt

Global Valuation, Accounting & Tax: 2026 US Corporate Pensions

UpdateM

Overfunded Status Increases

Corporate pension plans extend their overfunded levels. We estimate that S&P 1500

pension-heavy companies are operating at a median funded status of 148% as of April

2026. Multiple years of strong equity returns and elevated interest rates continue to

propel the median pension's overfunded status higher ( Exhibit 1 ). Pension managers with

significantly overfunded plans may shift asset allocations away from equities in favor of

fixed income options and/or continue to seek other de-risking options.

Exhibit 2: US Corporate Pension Funded Status

148%

140%

120%

100%

80%

60%

40%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 YTD

Source: Bloomberg and Morgan Stanley Research.

Estimated pension benefit obligations (PBO) were flat through the year. Moody's AA

corporate bond index, which we use as a proxy for pension discount rates, was down 7 bps

from the beginning of the year through December 31. Based on our rule of thumb (every

100 basis point increase/decrease in discount rate results in a 10-12% decrease/increase in

pension benefit obligations), thus a 7 bps decrease indicates a ~1% increase in pension

obligations.

Estimated plan assets grew by another ~11%. Based on a portfolio of 45% equities, 45%

bonds, and 10% real estate and others for pension plan assets, we estimate that pension

plan assets were up ~11% in 2025. We used the average of the S&P 500, Russell 2000,

and Russell 3000 Total Return Indices, BarCap US Aggregate TR Index, and MSCI US REIT

Index returns to estimate equity, fixed income, real estate and others returns.