Pension Funded Status Worsens in Q315

Pension plan funded status tumbled, from 83.4% in the second quarter to 78.7% at the end of the third quarter, according to Aon Hewitt.

U.S. pension plan deficits rose by $102 billion in the third quarter, a shift from the previous quarter that saw the deficit decline by $81 billion, according to the Aon Hewitt Pension Risk Tracker. Year to date, the funded status deficit has increased by $40 billion.  

Data from the Pension Risk Tracker, which evaluates daily funded status for Standard & Poor’s (S&P) 500 companies with defined benefit (DB) pension plans, shows the aggregate funded ratio decreased, from 83.5% to 78.7%. The change was largely driven by asset reductions of $79 billion, along with liability increases of $23 billion year to date. 

“Volatility in equity markets—particularly poor performance in August—drove the decline in funded status for the quarter,” says Ari Jacobs, Global Retirement Solutions leader at Aon Hewitt.

Aon Hewitt’s analysis also showed that bonds outperformed equities during the quarter, and that overall pension assets returned -3.5% over this time frame.

Among private-sector defined benefit plans with glide paths in place, approximately 5% executed a de-risking transaction in the third quarter, and the average size of those transactions was a 2.6% shift from return-seeking assets to liability-hedging.