Figure 1 tracks the rise of public pension debt from 2001 through 2024, using market values for assets, with projections for 2025 and a stress test for 2026.

The stress test applies either a 0%, -10%, or -20% market return in fiscal year 2026—pension funds experienced -20% during the Great Recession—to see how well today’s pension systems could weather another major market shock. Under the worst of these scenarios, the average funded ratio across U.S. pension systems would drop to 63%, revealing how vulnerable these plans remain to market volatility despite years of supposed recovery. The stress test is particularly important given how market crashes have historically had a major impact on pension funding that lasts decades.³

Interest rate cuts by the Federal Open Market Committee (FOMC) increase the present value of liabilities. Lower discount rates mean higher obligations, making annuity pricing less favorable over time  

Pension trusts absorbing full-service costs strain plan resources. Rising administrative and compliance expenses add pressure to already tight budgets.

Bundle services to reduce costs
Combining services under a single provider or integrated platform can significantly reduce overhead costs. Bundling also improves coordination between administrative teams and actuaries, ensuring faster decision-making and fewer errors. Industry benchmarks show integrated solutions often lead to 10–15% cost savings compared to fragmented service models. According to LIMRA’s Institutional Retirement Reference Guide, plan sponsors increasingly seek bundled solutions to streamline administration, improve compliance and reduce operational complexity. This approach also enhances transparency, making it easier to track liabilities and funding progress.

Streamline processes to eliminate redundancies and enhance operational efficiency
Many pension plans still operate with overlapping processes across compliance, reporting and participant communication. Streamlining these workflows reduces complexity and frees up resources for strategic initiatives. Automation tools can handle routine tasks like benefit calculations and data reconciliation, cutting manual work and minimizing risk of compliance breaches. Employers who adopt lean processes often report shorter cycle times for annuity purchases and plan terminations, which is critical in a fast-changing interest rate environment.

Add online pension plan administration to take efficiency a step further. Digital platforms centralize plan data and provide participants with self-service access to estimate retirement benefits, statements, forms, and retirement kits—reducing the administrative burden on HR teams. This approach improves accuracy, accelerates response times and enhances participant experience by making information available anytime, anywhere. For employers, online administration means fewer manual interventions, stronger compliance controls and the ability to focus on strategic decisions rather than day-to-day paperwork.

Position actuaries as strategic consultants in liability management and annuitization decisions.  Actuaries should not only be involved in valuation but also in shaping liability management strategies. Their expertise in modeling interest rate scenarios, mortality trends and annuity pricing makes them indispensable for informed decision-making. By elevating actuaries to a strategic role, employers can better anticipate market shifts and optimize timing for annuity purchases. This proactive approach often results in lower overall liability costs and improved funded ratios.