Now that most corporate pensions are materially stronger than they were prior to the Global Financial Crisis, investors are arguing that these plans can afford to take on more return-seeking assets — specifically, equities. For many corporate plans, funded status has improved, asset allocations have long since been substantially de-risked, hedge ratios are higher, and pension liabilities are often smaller relative to the sponsoring company.
Rick Ratkowski, managing director of investment strategies at the $483 billion investment manager NISA Investment Advisors, argues that plans funded at roughly 110 percent to 115 percent can modestly tolerate more return-seeking assets without threatening full funding, particularly if funded-status volatility remains around 5 percent to 6 percent.
“Given plans have already de-risked from where they were 25 years ago, you can add more equity in a measured way,” Ratkowski told Institutional Investor, adding that those well-funded plans could experience a two-standard deviation move and still be fully funded.
Prior to the GFC, most corporate plans were 70 percent equities and 30 percent bonds. Now, they’ve de-risked materially. With a managed asset allocation and high funded status, pensions can rethink what to do with the plans. “You have a good structure for reopening, even considering continuing to maintain the pension,” Ratkowski said.
For sponsors opting to reopen their plans, Ratkowski noted that they don’t necessarily have to reopen the pension the way it was originally created: Other systems can be adopted, such as a cash-balance structure. “When someone’s thinking of reopening, they should be thinking the world’s their oyster,” he said.
The NISA executive added that as long-term rates remain elevated, liability hedges can be increased without reducing equities.
The funded status of the largest corporate defined benefit (DB) pension plans has improved significantly. An analysis of 349 U.S. DB pension plans by WTW estimates that the aggregate funded status of these plans rose to 104 percent at the end of 2025 from 101 percent at the end of 2024. Pension obligations dipped slightly to an estimated $1.11 trillion at the end of 2025 from $1.16 trillion at the end of 2024.
Ratkowski explained that plans don't need to re-risk the portfolio to 50 percent return-seeking assets. But if funded status is strong and volatility remains below 5 percent, then Ratkowski says pensions with 20 to 30 percent in equities can add another 5 to 10 percent and still be in a comfortable position from a risk perspective.
Growing surpluses may also expand sponsors’ strategic options, including maintaining, redesigning, or even reopening pension plans rather than assuming that freezing or terminating them is the only path.
One investment chief for a corporate pension agreed that once a plan is in the 105 to 110 percent range, it can afford selective exposure to equities as well as opportunistic credit and real estate. And for plans at higher surplus levels, potentially toward 115 percent, sponsors can treat the surplus as a strategic asset.
“Overfunded plans can be more competitive,” the corporate allocator said. “If you’re cautious, your surplus can be more strategic.”
Martin Jaugietis, co-head of pensions for the Americas in multi-asset strategies and solutions at BlackRock, told II that these plans can also use surplus capital to gain competitive advantages in acquisitions (“An overfunded plan acquiring an underfunded plan is useful,” he said), pay healthcare benefits, or even reopen pension benefits, as IBM has done.
Newly proposed legislation — the Strengthening Benefit Plans Act of 2025 — would also allow the use of DB surpluses for 401(k) contribution; the key difference is that the regulation would not require terminating the plan first. Jaugietis added that making 401(k) contributions using funds from an open DB plan “is a really big deal” if passed.
