ERISA DB Plans up 24.2% in 2003

January 22, 2004 ( - The equity markets were good for the median Employee Retirement Income Security Act (ERISA) defined benefit plan, which was up 24.2% in 2003.

Private plans were not the only benefactors of an uptick in the equity markets in 2003.   As of December 31, 2003, public pension funds were up 22.8% and foundations and endowments had gained 23%, according to a data release from The Northern Trust Company’s Northern Trust Universe.

“The US equity programs of most plans outpaced the broad market indexes due to greater weighting to small and mid-cap stocks that were favored over larger stocks for the 12-month period,” Paul Finlayson, Vice President, Northern Trust said in a news release.   “The private equity and real estate segment gains were not as dramatic, which created a drag on the relative performance of plans having large allocations to those asset classes.”

Such a strong one year performance also had a ripple effect across longer-term plan returns.   The cumulative annualized five-year median return of all plans measured was 4.9%, up from last year’s five-year median of 3.2%.   Over the previous ten years, the median return for all plans was 9.6%, up from last year’s ten-year median of 8.8%.   

Yet, Finlayson cautions that pension plans need more years like 2003 before they are completely out of the woods.   “These are significant increases but it will take sustained performance and time to help funded statuses hurt by lowered discount rates and prior years’ negative performance,” said Finlayson.   

The Northern Trust Universe represents the performance results of over 300 large institutional investment plans, with a combined asset value of over $390 billion that subscribe to Northern Trust performance measurement services.