Funded Status of Largest U.S. Pension Plans Edged Higher in 2024

The funded status of the largest corporate defined benefit (DB) pension plans in the United States made modest gains in 2024 despite rising long-term interest rates and substantial gains for the domestic equity market. This is according to a WTW analysis released Jan. 2.

The advisory firm examined pension plan data for 361 Fortune 1000 companies that sponsor U.S.-based DB pension plans and have a December fiscal year-end date. Figures for 2024 are estimates of domestic plan assets and liabilities; prior-year figures are actual.

High notes from the new study included:

• An estimated 100% aggregate plan pension funded status at the close of 2024, vs. 98% at the end of 2023. This would mark the first year at or above 100% since 2007 (107%).
• Pension obligations declined by $130 billion due to higher interest rates and pension risk transfer activity — $1.12 trillion at the end of 2024 vs. $1.25 trillion at the end of 2023.

“Strong gains in the stock market and rising interest rates would traditionally have helped to strengthen the overall financial health of corporate pension plans,” said Joseph Gamzon, a managing director for WTW’s retirement business unit. “However, pension plan assets are less concentrated on equity investments today, as they hold more bonds to support liability-hedging strategies to provide funded status stability. As a result, many plan sponsors were able to achieve their goals of funded status stability while also seeing moderate increases in pension plan funding during 2024.”

According to the analysis, estimated overall investment returns, on average, were 3% in 2024, although returns varied significantly by asset class.

• Domestic large capitalization equities (+25%) outperformed domestic small/mid-capitalization equities (+12%).
• Long corporate and long government bonds, typically used in liability-driven investing strategies, had losses of 2% and 6%, respectively.

While overall investment returns were slightly higher, an active year in pension risk transfers and lower-than-normal cash contributions resulted in a decline in assets year over year.

“As we move into 2025, sponsors whose plans aren’t fully funded will want to keep an eye out for opportunities to manage costs and cash contributions, including investment strategy and de-risking initiatives,” said Fred Lamm, a managing director for the firm’s retirement business unit. “For those with well-funded plans, sponsors will want to think about how best to protect this asset and best utilize the surplus for employee benefits in the coming year.”

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