Defined benefit (DB) plans lost their 2019 funded status gains in May, and some firms say hedging liabilities would have helped.
Tag: DB plan funded status
With most companies that track defined benefit (DB) plan funded status showing an improvement in April and for the year, some suggest plan sponsors consider whether it’s time for a risk transfer or to set off portfolio glide path triggers.
Lower discount rates increased liabilities in March, but companies that monitor defined benefit (DB) plan funded status estimate a 1% to 2% increase in the first quarter.
Pension plans’ funding rose a mere 70 basis points last year, according to Goldman Sachs Asset Management.
J.P. Morgan’s “Corporate Pension Peer Analysis 2018,” says 2018 was the largest asset allocation de-risking year for defined benefit (DB) plans since 2011.
Firms that monitor defined benefit (DB) plan funded status attribute the increase to strong equity market performance.
Speakers on a PGIM Fixed Income webcast offered practical steps pension plan sponsors can take today and over time to protect funding levels; they suggested liability-driven investing is a smart way to “get off the funded-status rollercoaster.”
Stronger equity markets pushed pension funding up 2% to 3%, according to firms that monitor defined benefit plan funded status, but plan sponsors should continue to watch market volatility.
Consultants say market losses for U.S. pension plans in December were the worst in a decade.
Firms that monitor defined benefit (DB) plan funded status reported slight gains for the month.
Some firms that track pension funded status point out that plan sponsors should prepare for changes in the future as a market correction is expected and funding relief fades and higher plan sponsor contributions will be required.
The aggregate funded ratio is up 6.1 percentage points year to date, according to Wilshire Consulting.
DB plan funded status reached a five-year high in July.
However, firms that track DB funded status report 2% gains for the quarter and up to 6% for the year.
“The pattern of improvement paused last month owing to a dip in discount rates, but aggregate funded status remains near a four-year high as the long bull market continues to persist,” says Matt McDaniel, a partner in Mercer’s US Wealth business.
Data provided by LGIMA suggests the average U.S. pension plan’s funding ratio increased a full 2% during the month of April.
Despite two months in a row of funded status losses, most firms that track pension funding find the average funded status is still up for the year.
Institutions that track defined benefit (DB) plans’ funded ratios measured increases or decreases in funded status as high as 1%, but noted it could have been worse if not offset by higher liability discount rates.
Most firms that track DB plan funded status estimated between 1% to 3% improvement for the year.
Firms that track DB plan funding reported increases in the month ranging from 0.4% to 1.0%.