In February, pension plan sponsors experienced a decline in liability discount rates amid lower Treasury yields. The funded status for the hypothetical total return plan dropped slightly driven as falling treasury rates provided a headwind. The hypothetical LDI-focused plan saw an increase in funded status due to its interest rate hedge. The Treasury yield curve shifted downwards over the month across all tenors; the 10-and 30-year yields decreased slightly to 3.97% and 4.64%, respectively.
The discount rate for NEPC’s hypothetical total-return pension plan decreased 13 basis points to 5.49% and the frozen LDI-focused plan decreased 14 basis point to 5.23%. The total-return pension plan saw a slight decrease in funded status of 0.3% and LDI-focused plan saw an increase in funded status of 0.9%.
We anticipate continued market volatility and the potential for market disruption. Plan sponsors should diligently monitor sources of change in funded status versus expectations, as equities and interest rates are likely to remain volatile. This includes closely observing interest-rate hedge ratios and allocating across the yield curve as interest rates change.
Source: FactSet, FTSE and Brentwood LLC, as of February 28, 2026
Rate Movement
Retiree Buyout Index
The Buyout Index for retirees is estimated to be approximately 106.6% of PBO, as of February 28, 2026
Recent Insights from NEPC
The Art of Terminating a Coporate Pension Plan
Voluntary Employee Beneficiary Association – An Overview
Recent Corporate Pension Headlines
There were no new PRT litigation cases or updates on outstanding cases announced during the month. Nearly half of outstanding lawsuits have been dismissed to date. Courts have been split on other cases having denied dismissal in some cases. While recent news has trended in favor of PRT, some risk remains given the outstanding cases. Expected interest in PRT activity remains high given the strong funded position of plans broadly. NEPC will continue to monitor the situation and provide updates.
Sources:
Pensions & Investments. (2026, March 5). PI pension risk transfer 2026 outlook: Lawsuits remain the talk of the industry. https://www.pionline.com/institutionalinvestors/
pension-risk-transfer/pi-pension-risk-transfer-2026-outlook-lawsuits/
Encore Fiduciary. (2026, February 9). ERISA fiduciary litigation in 2025: Plaintiff law firms continue the frenetic pace, with broader allegations against both retirement plans and health plans. https://encorefiduciary.com/erisa-fiduciary-litigation-in-2025-plaintiff-law-firms-continuefrenetic-pace/
