The decrease in funding was the result of lower corporate bond yields increasing the liability value versus a smaller increase in the asset value. “We estimate that overall, the asset value increased by 2.2% due to positive returns for most asset classes, while the liability value increased by 2.9% during the month,” says Jeff Leonard, managing director of Wilshire Associates and head of the Actuarial Services Group of Wilshire Consulting.
“Year-to-date, the funded ratio for the sample plan has decreased by 4.3%, from 89.8 percent to 85.5%. This decrease was driven by the larger increase in liability value of 12.4% versus the 6.9% increase in asset value,” Leonard notes.
The aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration in-line with the Citi Group Pension Liability Index (CPLI) – Intermediate. The funded ratio developed in the analysis is based on the CPLI – Intermediate liability, plus service costs, benefit payments and contributions in-line with Wilshire’s 2014 corporate funding study. The most current month-end liability growth is estimated using the Barclays Long Aa+ U.S. Corporate Index. The assumed asset allocation is: U.S. Equity-33%; Non-U.S. Equity-22%; Core Fixed Income-17%; Long Duration Fixed Income-26%; and Real Estate-2%.