NEPC's May 2025 Pension Monitor

In May, defined benefit pension plan sponsors likely experienced an increase in funded status on the heels of a rally in public stocks. The Treasury yield curve increased across all tenors for the month while credit spreads tightened. The 10-year yield increased to 4.41% and 30-year yield rose 26 basis points to 4.92%.

The increase in Treasury rates offset the contraction in credit spreads, resulting in higher pension discount rates and lower pension liabilities. The discount rates for NEPC’s hypothetical pension plans increased about 14 basis points to 5.84% for the open total-return plan, while the discount rate for the frozen LDI-focused plan rose 14 basis points to 5.64%. NEPC’s hypothetical total return pension plan saw an uptick of 4.3% in funded status compared to a modest increase of 2.2% for our LDI-focused plan.

At NEPC, we anticipate continued market volatility and the potential for market disruption. Plan sponsors should remain diligent about monitoring sources of change in funded status versus expectations, as equities and interest rates are likely to remain volatile. This includes closely monitoring interest rate hedge ratios and allocating across the yield curve as interest rates change.

Recent Corporate Pension Headlines

Due to a provision in the Bipartisan Budget Act of 2015 (BBA 2015), the PBGC premium filing due date for plan years beginning in 2025 may be accelerated to September 15, 2025 instead of the normal due date of October 15, 2025. This one-time provision will impact when cash needs to be raised to fund the premium payment. The PBGC premium due date is expected to revert back to October 15 in 2026.

PRT Litigation Update:

On March 31, 2025, Alcoa’s motion to dismiss the lawsuit was approved, while Lockheed Martin’s motion was denied. Decisions on other pending cases have yet to be finalized. NEPC remains committed to monitoring the ongoing litigation and will continue providing timely updates to clients.