Is My Pension Safe? How to Check Your Plan's Funding

Updated Jun 2024

If you have a pension, the most important question is whether it will actually be there when you retire. Across the 151 pension plans PensionWatch tracks, the average funding ratio is 73.4% — meaning plans collectively have about 73 cents for every dollar they owe. Some plans are fully funded. Others are below 50%. Here is how to find out where yours stands.

Step 1: Find Your Plan's Funding Ratio

The funding ratio is the single most important number for assessing pension health. It measures what percentage of promised benefits a plan can currently cover with its assets. A plan with $80 billion in assets and $100 billion in liabilities is 80% funded. You can search for your plan on PensionWatch to find this number instantly, along with a Pension Health Score that grades plans from A (healthiest) to F (most at-risk).

The 80% threshold is widely used as the dividing line between healthy and underfunded. Plans above 80% generally have enough assets and expected contributions to pay benefits without distress. Plans between 60-80% are underfunded and may need to increase contributions or reduce future benefit growth. Plans below 60% are in serious trouble — at this level, the math becomes very difficult without dramatic intervention.

Step 2: Look at the Trend, Not Just the Snapshot

A single year's funding ratio can be misleading. A plan at 75% that has improved from 65% over three years is in much better shape than a plan at 75% that has declined from 85%. PensionWatch's Health Score weights the 3-year funding trend at 25% of the total grade because direction matters as much as current position. Check your plan's funding history chart to see whether it is heading in the right direction. Plans with consistently declining funding ratios are burning through assets faster than they are replacing them, which compounds over time.

Investment returns drive much of the year-to-year variation. A pension fund that assumes a 7% return but earns only 4% will see its funding ratio decline even if the sponsor is making full contributions. Three years of data smooths out market volatility and reveals the underlying trajectory.

Step 3: Check PBGC Coverage and Risk Level

If you are in a private-sector pension (corporate or multiemployer), check whether your plan has PBGC coverage. The Pension Benefit Guaranty Corporation insures private-sector defined benefit plans and will pay benefits up to approximately $81,000 per year if your plan fails. PensionWatch shows the PBGC risk classification for each covered plan: low, moderate, high, or critical. Plans rated "critical" by PBGC are at elevated risk of failing to meet their obligations.

If you are in a public-sector pension (state or local government), there is no PBGC coverage. Your benefits depend entirely on the government's ability and willingness to fund the plan. Public plans are backed by taxing authority, which provides a different kind of security, but several cities have cut pension benefits through bankruptcy proceedings, and some states have reduced cost-of-living adjustments for current retirees.

Step 4: Understand What Your Employer Is Contributing

Even a well-funded plan can deteriorate if the sponsor stops making adequate contributions. Check whether your employer is paying the full annual required contribution (ARC). Many public-sector plans have a history of sponsors contributing less than the actuarially recommended amount, deferring costs to future years. When sponsors chronically underpay, the unfunded liability grows not just by the shortfall amount but by the compound interest on that shortfall. A plan that is 85% funded today but receiving only 70% of its required contributions will almost certainly deteriorate over the next decade.

Step 5: Have a Backup Plan

Even if your pension looks healthy, prudent financial planning means not relying on any single income source for retirement. Consider supplementing your pension with personal savings through an IRA, 457, or other tax-advantaged account. This is especially important if your plan is below 80% funded, has a declining trend, or lacks PBGC coverage. The participants most vulnerable to pension cuts are those with no other retirement savings, so any amount you set aside independently adds to your financial resilience.

Red Flags to Watch For

• Funding ratio below 60% — the plan may not be able to pay full benefits long-term
• Three consecutive years of declining funding — the trend is working against you
• PBGC risk level "critical" or "high" — the federal insurer is concerned
• Sponsor consistently paying less than the ARC — underfunding is accumulating
• Plan is frozen or closed to new participants — the sponsor may be looking to exit
• Benefit formula changes or COLA reductions — early warning signs of financial stress

Use the PensionWatch search to look up your plan and see where it stands on each of these metrics. Every plan page includes a Pension Health Score, funding history, PBGC status, and a plain-English assessment of what the numbers mean for your retirement.