After decades of decline, corporate pension plans are experiencing a renewed interest from U.S. companies. This shift is primarily fueled by high funding ratios, with many plans now in surplus, and growing employee demand for more secure retirement options. IBM made headlines in late 2023 by announcing it would reopen its pension plan, frozen since 2008, and redirect its 5% 401(k) contributions into a cash balance plan within its overfunded pension system. This move allows IBM to utilize its $3.5 billion pension surplus, cutting costs and eliminating annual cash outflows to 401(k)s.
Several factors are contributing to this resurgence. U.S. corporate pensions currently boast their highest funding ratios in 16 years. For instance, the aggregate funded ratio for the 100 largest U.S. corporate defined benefit plans reached 112.1% as of July 31, 2026, with an aggregate surplus of $139 billion. This strong financial position reduces the incentive for pension risk transfers and allows companies to consider reusing their DB plans. Industry experts like Carl Hess, CEO of WTW, and John Lowell of October Three Consulting, note significant interest and conversations with around 100 plan sponsors regarding defined benefit plans.
Employee demand also plays a crucial role. Surveys indicate strong support for pensions, with 82% of Americans believing all workers should have access to one, and 65% viewing pensions as superior to 401(k)s for retirement security. Unionized workers, such as those at Boeing and Southwest Airlines, are actively pushing for better pension benefits. Employers are recognizing the efficiency of DB plans in providing lifetime income and pooling longevity risk, making them a more effective vehicle than defined contribution plans for ensuring retirement adequacy and offering a more orderly succession plan within businesses. Hybrid designs like cash balance plans are gaining traction as they combine portability with risk management.
While a full-scale return to the pension landscape of the 1970s (when pensions represented 32% of retirement plans, compared to 15% in 2023) is not anticipated, the trend suggests a notable change. Companies are performing due diligence, and while immediate widespread adoption isn't expected, analysts predict more companies will explore reopening or establishing new pension plans. The focus is shifting towards designs that offer financial flexibility for companies and enhanced retirement security for employees.
