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Investing May 9, 2002
Pension Assets Still Trail Liabilities: Ryan Labs
May 9, 2002 (PLANSPONSOR.com) - Pension plans had a
nail-biter of a month in April as a continuing weak equity
market and a strong bond showing contributed to assets
lagging liabilities by 7.59%, according to Ryan
Labs.
Reported by Fred Schneyer
On a year-to-date basis, assets growth trailed liability growth by 4.42%, according to the latest report by Ryan Labs.
Even worse, when 2000 and 2001 relative returns (assets lost to liabilities by 28.46% and 8.48% respectively) are factored in, assets brought up the rear by a whopping 40% during the 28-month period.
“If pensions have a guardian angel or patron saint, it would be wise to ask for some assistance,” Ryan researchers advised.
The sub-par market performance is also wreaking havoc with pension administrators for another reason – average Return on Pension Asset (ROA) assumptions of 9.2%, which Ryan labeled “lofty.”
Ryan said corporate actuaries and accountants compare market returns to these actuarial anticipated returns and amortize gains or losses over a long period of time – typically 15 years.
“As a result, the last two calendar years of underperformance have a 15-year life,” Ryan said. “To reduce and eliminate this earnings drag, relative performance has to improve radically.”