SFA Funds, Market Returns Boost Multiemployer Pension Funding

Funding levels for the multiemployer pension plans serving millions of American workers and retirees have improved dramatically over the last decade due to federal grants, rising bond yields and stock market performance.

The biggest factor, by all accounts, has been the Special Financial Assistance Program, enacted in 2021 as part of the American Rescue Plan Act. Administered by the Pension Benefit Guaranty Corporation to aide severely underfunded multiemployer defined benefit plans, it has successfully helped reverse benefit cuts and restore solvency as “a lifeline to protect the retirement security of millions of American workers, retirees and their families,” as then-PBGC Director Gordon Hartogensis described the program’s goals in 2022, when its rules were finalized.

Meanwhile, multiemployer plans’ investments into investment-grade corporate bonds, coupled with strong market returns, have helped buoy plans that were once just trying to stay afloat.

What Led to Special Financial Assistance

Multiemployer plans are pension funds created through an agreement between at least two employers and a union, often in the same industry, such as construction or transportation, according to the PBGC. Department of Labor data show that, as of 2023, there were 1,341 defined benefit multiemployer pension plans in the U.S. with 11.361 million participants and beneficiaries and $792 billion in assets.

In December 2020, the PBGC’s annual report stated that its Multiemployer Program, responsible for helping multiemployer plans across the country, had total assets of $3.1 billion, while the PBGC’s multiemployer liabilities totaled $66.9 billion. The PBGC projected that between 10% and 15% of participants were in plans that could become insolvent. Hartogensis said in the annual report, “It remains clear that legislative reform is necessary to avert insolvency.”

Of course, legislative reform did come, and by September 2021, after the Special Financial Assistance Program launched in July, the PBGC reported that its Multiemployer Program was no longer likely to run out of money within the next 20 years. It credited special financial assistance with addressing the severe underfunding and near-term insolvency of a large share of multiemployer plans.

The Current Picture

Fast forward five years, and Milliman estimated that the aggregate funded percentage of all U.S. DB multiemployer plans reached a record high 106% as of June 30, up from 100% one year prior and 103% at year-end 2025. More than two-thirds (69%) of plans were at least 100% funded, with 90% of plans at least 80% funded. In June 2025, U.S. multiemployer pensions reached fully funded status for the first time in the history of Milliman’s Multiemployer Pension Funding Study, which dates back to 2007.

According to Milliman’s report, 161 plans have received nearly $78 billion in special financial assistance under the program, adding 9% to the aggregate funded percentage since the SFA Program’s inception. The SFA Program allowed multiemployer plans in critical and declining status to apply for and receive a lump sum of money, administered by the PBGC, to ensure the pension funds can make benefits payments through 2051.

The aggregate funding surplus for multiemployer plans rose to about $55 billion in June from $28 billion at year-end 2025, according to Milliman’s report. The estimated investment return for multiemployer plan portfolios in the first six months of 2026 was about 5.6%.

“Multiemployer plans continue to benefit from strong investment markets and contribution levels that outpace plan costs,” said Tim Connor, co-author of the report summarizing Milliman’s study, in a statement. “While the strong funded position represents a significant milestone, trustees should evaluate the resilience of their funding and investment strategies with the help of plan professionals to understand how demographic or economic shifts could affect their plans over time.”

Checking In on the Investments

Pension funds that receive special financial assistance must monitor the returns resulting from the grant money separately from other sources of funding. The PBGC requires that at least two-thirds of SFA grant money be invested in “high-quality fixed income investments.” The Final Rule on Special Financial Assistance, issued in July 2022, states that the other third can be invested in “return-seeking investments,” such as stocks and stock funds.

Chris Wroblewski, head of solutions strategy at L&G Asset Management, America, and Chris McDonough, CIO at investment consultant firm Investment Performance Services, both say their clients that received special financial assistance invested them conservatively. In addition to the required high-quality fixed-income instruments, they often invest through cash-flow matching, a type of liability-aware investing in which the income coming from a fixed-income portfolio is designed to match a fund’s expected benefit payments and expenses.

“The idea [of the SFA] was not to kick the can down the road and become insolvent in 2051,” Wroblewski says. “It [was] really to set [plans] up for future success and remain solvent into perpetuity. The plans we’ve come across are certainly in shape to do that.”

McDonough says the 10 of his clients that received special financial assistance found it was not necessary to take on the additional risk that adding equities to their portfolios would entail, instead pursuing more of a liability-driven-investment strategy.

Wroblewski says that because interest rates were low when the special financial assistance program launched—well below the hurdle rate needed to achieve solvency—many portfolios ended up invested in predominantly Treasury portfolios.

McDonough says that PGBC assumptions projected most of his clients would earn somewhere between 3.1% and 3.8% on an invested special financial assistance portfolio, but the interest-rate environment allowed them to earn yields in the 5% to 5.5% range by investing in investment-grade corporate bonds—which earn a yield premium to Treasurys—and thereby outperforming the special financial assistance hurdle rate. McDonough says that in some cases, plans may be able to maintain solvency “indefinitely” if they continue to manage the assets appropriately.

On the fee front, McDonough says his clients’ investment fees have usually been dependent on the size of the mandates they award, but typically range from 6 to 17 basis points depending whether they are Treasurys or corporates.

Outperforming Assumption Rates

Many plans that received special financial assistance viewed it as a “gift” from the federal government, Wroblewski says. Concerns that investing those assets in riskier ways could lead to bad publicity, worse, may have led some funds to invest more conservatively. But some plans may be investing “legacy assets”—those they held before receiving special financial assistance—in riskier ways, knowing the federally awarded funds were invested conservatively.

At the outset of the special financial assistance grant period, McDonough says Investment Performance Services screened between 25 and 50 investment managers. Its investment committee approved five managers for potential client use; the managers that received the bulk of IPS clients’ assets included Loomis Sayles & Co., J.P. Morgan Asset Management and Capital Group Companies Inc. McDonough says he is also aware that BlackRock, Invesco Advisers Inc. and Bank of New York Mellon Corp. received investment mandates for special financial assistance grants.

McDonough says strong returns, particularly from public equities, have also helped drive the improved funding of multiemployer plans and allowed them to outperform their actuarial assumption rates. He adds that ongoing funding of a multiemployer pension fund is dependent upon the health of the trade served by the union represented in the plan. Many trades, he says, have been doing well and growing their membership, “benefitting from the boom in [artificial intelligence] data center development.”

Milliman’s data are based on standard actuarial assumptions and data in the latest Form 5500 filings from all U.S. multiemployer plans.

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