Corporate pension plans at the 100 largest US companies are now better funded than at any point in nearly three years - well-funded enough that annuity buyouts are currently available at below book value, a pricing condition that rarely holds for long.
The funded ratio of the Milliman 100 Pension Funding Index (PFI) reached 112.2% as of August 31, up from 104.9% a year earlier. The improvement reflects positive asset returns and a discount rate of 6%, a level not consistently sustained since October 2023, according to Milliman's September report. Plan assets in the index stood at $1.299 trillion against projected benefit obligations of $1.158 trillion, a surplus of $141 billion.
Strong funding levels make annuity buyouts easier to execute and cheaper to price. According to Milliman's pension buyout index, as of June, retirees in these plans could be annuitized at approximately 99.6% of accounting liabilities through competitive bidding. The cost of settling pension obligations with an insurer had dropped below book value, an unusual and time-limited condition.
Discount rates drive buyout pricing. Higher rates reduce the present value of future pension payments, which lowers what an insurer charges to take on those obligations. At 6%, the current rate is at a three-year high, and Milliman projects it will hold through 2026 barring major market shifts.
The US pension risk transfer (PRT) market recorded approximately $3.8 billion in buyout and buy-in sales in the first quarter of 2026, a 47% decline from the same period a year earlier. LIMRA attributed the drop to timing. An exceptionally strong fourth quarter of 2025 pulled forward volume that would otherwise have landed in early 2026. The organization characterized Q1 2026 figures as a temporary recalibration rather than a weakening of underlying demand.
2025 was the third-strongest year in US PRT history, with buy-in sales alone jumping 372% to $17.5 billion, based on LIMRA figures. More than 740,000 defined benefit plan participants were covered by a PRT transaction that year. One revealing pattern from 2025 carried into 2026: nearly two-thirds of contracts were under $1 billion, a signal that sponsors well below the Fortune 100 tier are now active PRT participants.
Gallagher's 2025 PRT market review noted increased insurer capacity for smaller and more frequent transactions. Growing competition among carriers has kept pricing competitive, and an adviser serving a mid-market employer with a legacy DB plan is no longer working in a market structured primarily for large sponsors. The growth of smaller transactions is also a factor behind Empower's recent push into DB administration, as covered in IBA's report on the company's acquisition of Milliman's retirement plan administration business.
Not every adviser is pushing clients toward immediate action. LIMRA's Keith Golembiewski, head of annuity research, noted that in a sustained environment of improved funded status, some advisers encourage plan sponsors to hold rather than transfer. The reasoning: weigh annuity pricing against the potential for continued asset growth.
The reason is that a plan that holds its assets could capture further gains if markets cooperate, but retains exposure if they do not. A plan that buys out a retiree cohort now locks in current pricing and removes that liability slice from the balance sheet permanently. It also eliminates administrative costs and Pension Benefit Guaranty Corporation (PBGC) premiums tied to maintaining those obligations. ERISA requires plan sponsors to select the safest available annuity provider when executing a transfer, a standard that has produced litigation when that due diligence was alleged to be insufficient. Earlier coverage of a class-action filed against Bristol-Myers Squibb over its 2019 transfer to Athene details how that fiduciary standard plays out in practice.
The buy-in has gained ground as a middle path. It allows a plan to transfer asset and longevity risk to an insurer while keeping the liability on the balance sheet, with an option to convert to a full buyout later. LIMRA reported a 443% increase in buy-in premiums in Q1 2026 compared with the same period in 2025, though off a small base.
Milliman projects the funded surplus to reach $145 billion by the end of 2026 and $156 billion by the end of 2027, assuming current rates hold and assets return 6.61% annually. Under a pessimistic scenario, with rates falling to 5.20% and returns of 2.61%, the funded ratio could drop to 99% by year-end 2027. That range captures the downside of waiting: conditions can reverse faster than a plan termination can be executed, as the PRT market's steep pullback in mid-2025 demonstrated when deal activity stalled sharply amid volatility.
