Pensions Lost Ground with Negative Returns in August

The aggregate funded ratio for U.S. corporate pension plans decreased nearly 3%.

The aggregate funded ratio for U.S. corporate pension plans decreased to 83.3% for the month of August, according to Wilshire Consulting, the institutional investment advisory and outsourced-CIO business unit of Wilshire Associates Incorporated.

The decrease in funding was the result of a larger decrease in asset value compared to the decrease in liability value.

“We estimate that overall the funded ratio for the plan sample decreased by 2.8% from 86.1% in July to 83.3% in August,” says Ned McGuire, vice president and member of the Pension Risk Solutions Group of Wilshire Consulting. “The decline in funding levels was driven by a 0.9% decrease in liability value versus a 4.2% decrease in asset value. The asset result is due to negative returns for most asset classes, while the liability value declined due to a slight increase in corporate bond yields.”

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 – Intermediate. The Funded Ratio is based on the CPLI – Intermediate liability, with service cost, benefit payments and contributions in-line with Wilshire’s 2015 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 – 32%;
  • Non-U.S. Equity – 21%;
  • Core Fixed Income – 18%;
  • Long Duration Fixed Income – 27%; and
  • Real Estate – 2%.