A New Pension Roadmap for Plan Sponsors

A New Pension Roadmap for Plan Sponsors
May 4, 2026 5 mins

A New Pension Roadmap for Plan Sponsors

A New Pension Roadmap for Plan Sponsors

Defined benefit (DB) pension plan management has entered a new era. Learn more about the different tools and approaches plan sponsors need to meet their long-term goals.

Key Takeaways
  1. Many S&P 500 pension plans are now fully funded. This new landscape provides plan sponsors with three fluid strategic paths.
  2. Plan sponsors should evaluate their long-term objectives and build a tailored and dynamic endgame strategy.
  3. The pension risk transfer (PRT) market is growing, both in the number of insurers and available solutions, offering more flexibility and competitive pricing for plan sponsors.

The New Era of DB Pension Management

After the dot-com bubble and 2008 financial crisis, DB plans were treated as legacy liabilities, often described as being on paths of “termination” or “hibernation.” In recent years, we’ve entered a new era driven by aggressive funding. Funding is due to Pension Benefit Guaranty Corporation (PBGC) premiums and tax reform. The rapidly expanding pension risk transfer (PRT) market also improved funding position, as did favorable post pandemic capital market conditions.

Three Strategic Paths for Long-Term Pension Strategy

Today’s long-term pension strategies recognize that there are more options than just termination or hibernation. There are now three paths that plan sponsors can use for endgame planning, depending on their objectives: 

  1. Maintain and Modernize
  2. Hibernate and Shrink
  3. Terminate and Exit

Fluidity is key. Plan sponsors can use more than one of the strategic paths, and they can also move between the three paths. 

25%

pensions are funded at 110% or more

Source: Analysis of corporate 10-K filings with the SEC as of December 31, 2025 for the companies in the S&P 500

Key Investment Challenges Across Pension Strategies

Each pension endgame strategy has unique challenges, but they are all impacted by three themes facing DB plan investors:

  1. Narrowing equity/risk premium
    Future returns of public equities are unlikely to mirror the past 15 years, increasing the need for diversification beyond traditional stocks and bonds.
  2. Tight credit spreads
    This creates asymmetric risk for liability hedging portfolios with significant credit exposure. Enhanced LDI strategies can improve resilience through higher yields and lower credit beta than portfolios only exposed to long credit.
  3. Yield curve steepening
    Recent yield curve steepening highlighted the importance of key rate duration hedging. More customized strategies protected funded status better in 2025 and should remain a priority moving forward.

Precision matters most in endgame strategies, but customization remains valuable across all paths.

New Pension Risk Transfer Developments 

No matter which endgame  applies, PRT is a critical tool for liability management. 2025 was a very strong year for the U.S. PRT market. There were nearly 700 transactions, with approximately $49B in premium, including a record $28B in Q4. 

The transaction mix included: 400+ plan terminations, approximately 250 retiree liftouts and approximately 20 buy-ins.  Notably, buy-in premium jumped from ~$4B in 2024 to over $17B in 2025, signaling a major shift in sponsor behavior.

The PRT market now includes 22 insurers, up from just eight in 2012. Capabilities have also expanded. Nearly all insurers now bid on terminations. More insurers handle complex liabilities, and 12 insurers now offer buy ins, doubling from just a few years ago. This increased competition has materially improved pricing and flexibility for plan sponsors.

Putting it All Together

While the new era of pension plan management is complex, it also offers more options and opportunities to define a path forward. 

Learn more about how DB pension plans are evolving:

Contact us

If you are evaluating next steps for your defined benefit plan—whether maintaining, de‑risking, or transitioning risk—contact our team for further perspectives tailored to your objectives.

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Disclaimer

The information provided relates to Aon Consulting, Inc. (“ACI”), Aon Investments USA Inc. (“AIUSA”), Aon Solutions Canada Inc. (“ASC”), and Aon Investments Limited (“AIL”). Aon plc is a large diversified professional services company, and services are provided through its indirect subsidiaries and affiliated entities. Within the United States, investment advice and investment consulting services (such as DB advisory and OCIO services) are provided by AIUSA, and non- investment consulting services (such as pension risk transfer services) are provided by ACI. Within the United Kingdom, investment advice and investment consulting services (including pension risk transfer services) are provided by Aon Investments Limited, which is authorized and regulated by the Financial Conduct Authority. Within Canada, advisory investment consulting services are provided by ASC. Nothing in this material should be construed as legal, tax, or investment advice. Please consult your own independent professional advisers for advice tailored to your circumstances. To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the prior approval of Aon. The opinions expressed are as of the date of this webinar and are subject to change due to market or economic conditions and may not come to pass. The information contained herein is provided for general informational and educational purposes only and does not constitute investment advice or a recommendation regarding any security, strategy, or course of action.

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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