Pension Finance Update April 2026
Pension finances lost ground in March due to declining stock markets, but higher interest rates softened the blow.
Pensions roared back in April on the strength of surging stock markets. Both model plans we track[1] gained ground last month: Plan A improved 6% in April, ending the month up more than 5% for the year, while the more conservative Plan B gained 2% last month and is up more than 1% through the first four months of 2026:
Assets
Stocks gained substantial ground across the board in April. A diversified stock portfolio gained 10% during April, ending the month up more than 8% for the year.
Treasury rates rose 0.10% during March but corporate bonds increased only a couple basis points, reflecting narrowing of credit spreads. As a result, bonds were flat to down 1% last month, ending April down 1% through the first four months of 2026.
Overall, our traditional 60/40 gained 6% in April, ending the month up 5% for the year, while the conservative 20/80 portfolio gained 2% last month and is up 1% through the first four months of 2026.
Liabilities
Pension liabilities (for funding, accounting, and de-risking purposes) are driven by market interest rates. The first graph below compares our Aa GAAP spot yield curve on December 31, 2025 and April 30, 2026 (along with the movement in the curve last month). The second graph below shows our estimate of movements in effective GAAP discount rates for pension obligations of various duration during 2026:
Corporate bond yields rose a couple basis points in April. As a result, pension liabilities rose a fraction of 1% last month, ending the month flat to down 1% for the year.
Summary
Double-digit stock increases erased March losses and then some, allowing pension finances to reach a new high-water mark by the end of the month. The graphs below show the movement of assets and liabilities during the first four months of 2026:
Looking Ahead
Sustained higher interest rates since late 2022 have substantially diminished the impact of pension funding relief during 2023-2026. Underfunded plans are likely seeing higher required contributions for the next few years.
Discount rates were close to flat last month. We expect most pension sponsors will use effective discount rates in the 5.4%-5.8% range to measure pension liabilities right now.
The table below summarizes rates that calendar-year plan sponsors are required to use for IRS funding purposes for 2026, along with estimates for 2027, including the rate “corridor” that applies to the 24-month average rates under funding relief for each segment.
[1] Plan A is a traditional plan (duration 12 at 5.5%) with a 60/40 asset allocation, while Plan B is a largely retired plan (duration 9 at 5.5%) with a 20/80 allocation with a greater emphasis on corporate and long-duration bonds. We assume overhead expenses of 1% of plan assets per year, and we assume the plans are 100% funded at the beginning of the year and ignore benefit accruals, contributions, and benefit payments in order to isolate the financial performance of plan assets versus liabilities.
