Pension Finance Update June 2026

Stocks slipped in June, producing modest losses for pension sponsors in June. Both model plans we track¹ lost ground last month: Plan A declined less than 1% in June, ending the first half of 2026 up more than 7%, while the more conservative Plan B lost a fraction of 1% last month and remains up 2% through the first half months of 2026: 

Assets

Stocks mostly lost ground in June. A diversified stock portfolio lost less than 1% last month, ending the first half of 2026 up more than 13%.

Treasury rates moved lower during June while corporate bond yields edged upward, reflecting widening of credit spreads. As a result, bonds were up a fraction of 1% last month, ending June up 0%-1% through the first half of 2026.

Overall, our traditional 60/40 was flat in June, ending the month up 8% for the year, while the conservative 20/80 portfolio was also flat month and is up 2%-3% through the first half 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 June 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 less than 0.1% in June. As a result, pension liabilities were flat last month and also flat through the first half of 2026.

Summary

Continued stock growth and modestly higher interest rates have allowed pension finances to continue to improve so far this year. The graphs below show the movement of assets and liabilities during the first half 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 again 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.

¹Plan 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.