The retirement and pension landscape entering 2026 is marked by a rare combination: historically strong funded status for corporate defined benefit plans, the most significant wave of regulatory changes in years under SECURE 2.0, and a strategic inflection point where plan sponsors must decide whether to terminate, de-risk, or maintain plans that are now flush with surplus.
For pension actuaries, enrolled actuaries performing valuations, and retirement consultants advising plan sponsors, 2026 presents both opportunity and complexity. Here is a comprehensive look at where things stand and what actuaries need to be focused on.
Corporate Pension Funding: Near-Record Territory
The Milliman 100 Pension Funding Index - the most widely followed barometer of U.S. corporate pension health - tells a remarkable story heading into 2026. The funded ratio for the 100 largest corporate DB plans reached 109% in January 2026, building on a December 2025 figure of 108.1%. The net surplus stands at approximately $98 billion.
This represents a dramatic turnaround from just a few years ago. The funded ratio was 99.5% at the end of 2023, meaning the aggregate plan was still in deficit. A combination of rising discount rates (which reduce the present value of pension liabilities) and reasonable investment returns propelled funded status through the 100% threshold during 2024 and into surplus territory that continued growing through 2025.
Mercer’s parallel analysis of S&P 1500 plan sponsors shows an aggregate funded level of 110% as of year-end 2025, with a $146 billion surplus - $11 billion higher than one year earlier. MetLife Investment Management estimated average funded status at 106% for its tracked universe.
The primary factor is discount rates. Corporate bond yields - the basis for pension liability discounting under both ERISA and ASC 715 - have remained elevated compared to the post-2008 period. Milliman reported a year-end 2025 discount rate of 5.46%, which is well above the sub-3% rates that inflated pension liabilities earlier in the decade.
On the asset side, bonds now represent the majority allocation for Russell 3000 pension plans, reflecting years of de-risking glidepath implementation. This fixed-income-heavy allocation means plan assets are more correlated with liabilities, producing greater funding stability even if total returns are modest.
Milliman’s projection: If plans achieve the expected 6.53% median asset return and the current discount rate holds through 2026 and 2027, the surplus is projected to grow to $121 billion (funded ratio of 110%) by year-end 2026 and $143 billion (funded ratio of 111.9%) by year-end 2027.
What Pension Actuaries Should Note
Record-high funded status creates a “good problems to have” scenario, but it brings its own actuarial challenges. Contribution calculations under ERISA use smoothed segment rates, not market rates, which means the funding basis can diverge from the accounting basis. Some sponsors started seeing this dynamic impact contribution requirements in 2024–2025, where funding-basis funded status lagged the accounting-basis surplus.
Additionally, overfunded plans face the asymmetric challenge of having surplus that cannot easily be accessed while still bearing the risk of a funded status reversal if rates decline or markets drop.
SECURE 2.0: The 2026 Implementation Wave
The SECURE 2.0 Act of 2022, with its 92 provisions rolling out through 2033, has its most operationally complex provision taking effect in 2026: mandatory Roth catch-up contributions for higher earners.
The Roth Catch-Up Requirement (Effective January 1, 2026)
Starting in 2026, plan participants age 50 or older whose FICA wages exceeded $150,000 in the prior year must make any catch-up contributions on a Roth (after-tax) basis. Pre-tax catch-up contributions are no longer available to this group. This provision was originally scheduled for 2024 but was delayed twice due to implementation challenges. The IRS issued final regulations in September 2025, with a “good faith compliance” standard applying throughout 2026 before strict enforcement begins in 2027.
This change is more complex than it sounds. Plan administrators must track prior-year FICA wages from the specific employer sponsoring the plan, modify payroll systems to route catch-up contributions appropriately, and ensure their plans actually offer Roth contribution options. Plans that don’t offer Roth cannot accept catch-up contributions from affected employees at all - a potentially significant benefit reduction.
Super Catch-Up Contributions (Ages 60–63)
Continuing from 2025, participants who reach ages 60, 61, 62, or 63 during the plan year can make enhanced catch-up contributions of up to $11,250 for 2026 (versus the standard $8,000 catch-up for those age 50+). This provision was designed to help workers who may not have saved enough earlier in their careers, and is generating significant participant interest according to plan administrators.
Auto-Enrollment Escalation Kicks In
New 401(k) and 403(b) plans established after December 29, 2022, were required to include automatic enrollment at a minimum 3% contribution rate with annual 1-percentage-point escalation up to at least 10%. By early 2026, participants in plans established right after SECURE 2.0 passed are seeing their first or second automatic escalation. Plan sponsors should expect some participant confusion as contribution rates increase without active participant elections.
Other 2026 Provisions
The plan document amendment deadline for most SECURE 2.0 provisions is December 31, 2026, for non-governmental, non-collectively-bargained qualified plans. This creates a compliance push throughout the year, even for provisions that took effect in 2023 or 2024 but were operating under “good faith” implementation. Enrolled actuaries involved in plan design and compliance should be coordinating with plan counsel on these amendments.
For Retirement Actuaries and Consultants
The combination of mandatory Roth catch-ups, super catch-ups, and auto-escalation creates a year where participant communication is critical. Several industry observers have noted that employees whose paycheck decreased due to auto-escalation often don’t realize it was a planned feature, not an error.
Actuaries advising plan sponsors should ensure contribution modeling reflects these new provisions when projecting plan costs and participant outcomes.
Pension Risk Transfer: Normalizing After a Record Year
The pension risk transfer (PRT) market - group annuity buyouts and buy-ins - is entering 2026 after a year of recalibration. Total PRT sales in 2024 reached $51.8 billion, up 14% year-over-year and just shy of the 2022 record, according to LIMRA. A record 794 individual contracts were executed, and 14 carriers closed at least one deal exceeding $1 billion.
The 2025 market, however, told a different story. Through the first three quarters, total PRT sales were $21.6 billion, down 48% from the same period in 2024. The drop was concentrated in the “jumbo” market - large transactions that disproportionately impact headline figures. Smaller and mid-sized transactions remained robust, with over 80% of contracts in 2025 under $50 million.
One notable trend: the buy-in market is surging. Buy-in sales jumped 328% in Q3 2025 to $4.3 billion, the highest quarterly buy-in volume ever recorded. In a buy-in, the plan sponsor purchases a group annuity that is held as a plan asset, while the pension liabilities remain on the sponsor’s balance sheet. This provides economic de-risking without the finality - or upfront cost - of a full buyout.
The PRT landscape has expanded considerably, with over 20 active insurers now offering group annuity products, double the number from a decade ago. This competitive capacity has improved pricing and deal structures.
PBGC flat-rate premiums reach their highest levels in 2026 - $111 per participant, plus a variable rate premium of 5.2% of unfunded vested benefits (subject to a $751 per-participant cap). These premiums, which have more than tripled since 2012, continue to be a powerful motivator for sponsors to reduce their DB plan populations through PRT transactions.
The Surplus Access Question
Perhaps the most strategically significant development for pension actuaries is proposed legislation that would allow pension surplus transfers to defined contribution plans. Historically, accessing surplus required plan termination.
If enacted, this legislation could fundamentally change the calculus for well-funded plans, encouraging sponsors to maintain their DB plans rather than terminate - a meaningful shift in the retirement landscape. Milliman’s Zorast Wadia noted that plan sponsors are “getting smarter about the uses of surpluses” and that the era of one-sided endgame thinking may be evolving.
For pension actuaries: PRT pricing analysis remains a core skill. Actuaries should be helping sponsors evaluate the buy-in versus buyout tradeoff, understand how PBGC premium savings factor into the ROI of a transaction, and model the impact of potential rate movements on both funded status and PRT pricing windows. With funded ratios at 109%+, many plans have the financial capacity to execute transactions - the question is whether the timing and pricing are optimal.
PBGC: Record Surplus, But Premium Pressure Persists
The PBGC itself is in the strongest financial position in its 50-year history. The single-employer program reported a positive net position of $62.2 billion for fiscal year 2025 - the fifth consecutive year of growth. The multiemployer program had a positive net position of $2.6 billion, reflecting the stabilizing impact of the Special Financial Assistance (SFA) program.
The PBGC’s projections show the single-employer program remaining positive over the next decade, with the surplus potentially growing to over $100 billion. For the multiemployer program, solvency is projected for more than 40 years, a dramatic improvement from just five years ago when multiple major plans were on the brink of insolvency.
Despite this financial strength, PBGC premium rates continue to climb under statutory formulas. The 2026 flat-rate premium of $111 per participant is up from $35 in 2012. Mercer’s global chief actuary, Bruce Cadenhead, has characterized the single-employer program’s surplus as “clearly excessive” given that total underfunding across all insured single-employer plans has declined to only $85 billion.
The disconnect between the PBGC’s financial health and the premium burden on plan sponsors creates an ongoing policy tension - premiums that are “a major factor in discouraging employers from continuing to offer benefits through defined benefit plans,” according to Cadenhead.
The maximum guaranteed benefit for plans terminating in 2026 rises to $93,477 per year at age 65 (single life annuity), up from $89,181 in 2025.
Multiemployer Update
The SFA program continues to process applications, with 122 plans having received nearly $73 billion in grants as of mid-2025, adding 9% to the aggregate funding percentage across multiemployer plans. Eligible plans have until December 31, 2025, to submit initial applications, with revised applications due by December 31, 2026. A Milliman study of overall multiemployer funding found that plans reached a historic aggregate funding surplus of approximately $3 billion by mid-2025, overcoming a $23 billion shortfall from year-end 2024 - driven by 6.1% investment returns and continued SFA distributions.
For enrolled actuaries: The interaction between PBGC premium optimization and contribution strategy is increasingly complex. With flat-rate premiums at $111 and variable-rate premiums at 5.2% of unfunded vested benefits, the economic incentive to minimize both participant counts (through PRT) and unfunded liability (through accelerated contributions) is substantial. Actuaries should be modeling these tradeoffs alongside the potential for legislative premium relief.
De-Risking Strategy: The 2026 Decision Framework
With funded ratios at near-record highs, 2026 is a strategic crossroads for pension plan sponsors. From tracking industry surveys and conference discussions, the patterns point to three dominant strategies:
Strategy 1: Accelerated termination. Some sponsors view the current funded status as an exit window. Full plan termination requires purchasing annuities for all remaining participants, settling all liabilities, and liquidating the plan trust. The combination of strong funded status and competitive PRT pricing makes this more affordable than it has been in years.
Strategy 2: Ongoing de-risking with maintained plan. A growing number of sponsors - 68% according to Aon’s 2025 Global Pension Risk Survey - intend to maintain their plans rather than terminate. These sponsors are using a combination of liability-driven investing (LDI) to hedge interest rate risk, selective PRT transactions (retiree lift-outs, deferred participant lump-sum windows) to reduce plan populations, and investment glidepaths that increase fixed-income allocation as funded status improves. Buy-ins are gaining traction as a de-risking tool that doesn’t require plan termination.
Strategy 3: Surplus harvesting. If legislation passes allowing surplus transfers to DC plans, a third strategy emerges: maintain the DB plan, use the surplus to fund employer contributions to the 401(k), and keep the DB plan as an ongoing benefit. This would represent a paradigm shift in pension management - turning DB plans from legacy liabilities into strategic assets.
For Pension Actuaries
The choice between these strategies has major actuarial implications. Termination requires a precise settlement liability calculation and buyout pricing analysis. Ongoing de-risking requires continuous asset-liability monitoring, glidepath management, and PBGC premium optimization. Surplus harvesting, if available, requires careful analysis of funding rules, contribution requirements, and the interaction with employee benefit strategy.
In all cases, sensitivity analysis around discount rate movements is critical - a 100-basis-point decline in rates could reduce funded ratios by 8–12 percentage points, transforming a comfortable surplus into a deficit.
Emerging Issues: Mortality Assumptions and Longevity Risk
One area that deserves attention from pension actuaries in 2026 is the state of mortality assumptions. The Society of Actuaries’ MP mortality improvement scales, last substantially updated to MP-2021, continue to be the standard for pension valuations. However, the mortality experience following the COVID-19 pandemic has created uncertainty about whether pre-pandemic improvement trends will resume, accelerate, or stall.
For plans with large retiree populations, even modest changes in mortality improvement assumptions can materially impact liabilities. A shift from MP-2021 to a more conservative (higher improvement) assumption could increase liabilities by 1–3% depending on plan demographics. Conversely, if post-pandemic mortality has permanently shifted (as some demographic research suggests), current assumptions may overstate liabilities.
The PBGC updated its Section 417(e) mortality table for 2026 annuity starting dates, which contributed to an approximately 5% increase in the present value of maximum guarantee amounts at ages 62 and above. This signals a broader trend of mortality table updates that pension actuaries should be incorporating into their assumptions review process.
What Pension and Retirement Actuaries Should Be Doing Now
Enrolled actuaries performing valuations: Review the interaction between ERISA funding segment rates and current market rates. With smoothing mechanisms, the funding basis may lag the accounting basis, creating sponsor confusion about contribution requirements when the plan appears overfunded on an accounting basis. Prepare for the December 31, 2026, plan amendment deadline for SECURE 2.0 provisions.
PRT and de-risking specialists: Evaluate whether current funded status represents a strategic window for transaction execution. Model PBGC premium savings as part of the PRT business case - the $111 flat-rate premium and 5.2% variable rate premium make participant count reduction economically compelling. Track the buy-in versus buyout tradeoff as buy-in volumes surge.
DC plan consultants: Ensure plan sponsor readiness for Roth catch-up contributions and auto-escalation impacts. Educate participants on the changes - the payroll confusion from auto-escalation is already creating friction. Prepare participant communication materials that explain the $150,000 FICA wage threshold and Roth-only catch-up requirement.
Retirement income specialists: Monitor the growing convergence of DB and DC systems. In-plan annuity options within DC plans, lifetime income illustrations on participant statements, and the potential for DB surplus transfers to DC plans all point toward a hybrid retirement system that requires actuarial expertise on both sides.