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Setting ROAs for 2025: A guide for US corporate and public plans

Multiple authors
November 2024
16 min read
2025-11-30
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
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The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.

Key points

  • Corporate plan ROA assumptions increased meaningfully in 2023, the most recent year reported. We believe they could modestly decline in 2025, reflecting the lower capital market assumptions we saw in late 2024. 
  • Public plan ROA assumptions, on average, were unchanged from the prior year at 6.9%. The average assumption has leveled off in recent years after several years of notching down slowly. 
  • In terms of capital market assumptions, we continue to predict that long-term equity and bond returns will not keep pace with the returns of the last 50+ years. 
  • We recommend that sponsors develop their investment policy based on their specific risk and return objectives and time horizon, rather than tying investment policy to a specific long-term ROA to manage pension expense or the reported liability.

As part of their year-end reporting process, US corporate and public defined benefit (DB) plan sponsors must set an assumption for the long-term expected return on assets, or ROA. To help sponsors make more informed decisions, we provide this annual update on ROA assumptions, including our latest trend analysis and long-term capital market assumptions.

Corporate plans

Corporate sponsors use the ROA assumption to determine the pension expense recognized on their income statements. Under US accounting standards, the pension expense includes a credit (income) equal to the plan’s expected return on assets during the fiscal year.

The average ROA assumption reported by Russell 3000 companies at year‑end 2023 was 5.9%, which was 70 bps higher than the average in 2022. This reversed a 15-year string of declining ROA assumptions. Still, the average ROA assumption is 200 bps lower than in 2006, when the introduction of mark-to-market balance sheet accounting for pension plans by the Financial Accounting Standards Board (FASB) and the passage of the Pension Protection Act by Congress first prompted many plan sponsors to reevaluate their investment strategies.

The distribution of ROA assumptions sheds additional light on the long-term decline in the average assumption. In 2006, just over 10% of companies selected an ROA assumption below 7.0%. But by 2023, 80% of companies had selected an ROA assumption below 7.0%. Revisions have occurred across the board, although…

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