After years of pension freezes and closures, improved funded positions are prompting sponsors to ask whether their retirement programs still deliver
For much of the past two decades, defined benefit (DB) pensions were treated as liabilities to wind down rather than tools to deploy.
Plan sponsors spent years focused on risk reduction, driven by weak funded positions and volatile markets that left little room for anything else. But improved balance sheets and persistent gaps in retirement security are forcing a different conversation, one that asks whether the assumptions guiding pension strategy still hold, according to Royce Kosoff, senior managing director, head of intellectual capital deployment at WTW’s Florida office.
From risk management to opportunity evaluation
Now, he noted the financial picture has shifted and how sponsors frame their pension strategy has itself become the issue, Kosoff argues. In the US, roughly half of large corporate sponsors now sit at fully funded status, according to WTW data. Coming out of the global financial crisis, plans were badly underfunded and employers lacked the capital to shore them up.
Moreover, legislative changes and market turbulence only reinforced a singular focus on risk reduction - a mindset that Kosoff acknowledged persisted for the better part of two decades.
Kosoff suggests that era is giving way to something different. With markets rebounding and funded positions strengthening, sponsors are starting to ask broader questions about where their workforce stands and what their retirement programs actually deliver.
“We’re now seeing, I don’t want to call it a full shift, but just a bit of a pivot from 100 per cent risk reduction to now looking at more of an opportunity evaluation,” he said.
The headline announcements about plan reopenings, Kosoff notes, are the end point of that process, not the starting point. Behind each one sits a sponsor that has moved along the spectrum from pure risk management to asking whether its retirement program is fit for purpose today.
Modern designs vs. legacy plans
Whether this constitutes a broad pension revival is still unclear, Kosoff said, as the reopening announcements and the funded status gains driving them have largely come in the last few years. He also believes it’s too early to gauge how far the trend will go.
What he does stress, however, is that the plans being put in place now are fundamentally different from the legacy structures frozen a generation ago. Employers also aren’t copying old blueprints because they’re designing plans that fit their current financial position and workforce needs from the ground up.
"I don’t want to call it renaissance or full returns. It’s targeted in pockets in different spaces," he added.
Pension surplus is forcing a strategic conversation
For many sponsors, surplus is unfamiliar territory. After years of underfunding, having excess assets in the plan is a relatively new situation and one that demands a strategic response. Kosoff notes that for some organizations, surplus has been the direct catalyst for reopening or reintroducing a DB component.
“It’s definitely a strategic asset, and then how the employer utilizes it, opening or reopening a plan, having a defined benefit (DB) feature for more is one of those opportunities to use the strategic asset,” he said.
To that end, reopening or introducing a pension makes sense when two conditions align, Kosoff explained. The first is financial as the sponsor’s plan and overall balance sheet need to be strong enough to support it. He emphasized how a plan that remains deeply underfunded is a poor candidate, while one in a healthy funded position opens the door while the second is workforce need - employees asking for retirement security and additional support that existing DC arrangements haven’t delivered.
Is your retirement program fit for purpose?
Not every sponsor with a strong balance sheet will act. Some remain satisfied with their DC setup. But for those that see both the financial capacity and the employee demand, the next step is designing something that fits within their specific cost tolerances, risk appetite and governance structure.
“We're doing this for a purpose, and it has to fit within the employers' goals for their employee total rewards programs and how they're going to attract for talent, how they're going to retain talent, what their overall sort of deal is. So that's the way we see it.”
For sponsors looking to pressure test whether a modern pension belongs in their strategy, Kosoff said the starting point is a basic question: does the current retirement program still serve its purpose in 2026?
After all, many organizations, particularly in the US, are running multi-tiered systems - legacy DB structures for one group, DC-only for another, sometimes with bargained and non-bargained populations layered on top. In many cases, he suggests, the overall design hasn’t been reviewed in a decade or more.
That’s why Kosoff underscored the goal is to map what the full workforce is receiving, across generations and employment groups, and then ask whether it delivers what the organization needs it to.
"It's really starting with what do we have now? Is it fit for purpose, or can we strengthen it further? And does the financial health of the program, being stronger now, aid in what we want to do?"
