Pension Funding Tracker Shows Funding Decrease in Second Quarter

Sibson and Segal Marco Advisors’ Pension Funding Tracker Shows Funding Decrease in Second Quarter

The funded status of the model pension plan examined by Sibson Consulting and Segal Marco Advisors fell by 2 percentage points to 82 percent in the second quarter of 2017. The funding decrease was due to a 5 percent liability increase that offset a 3 percent increase in asset value.

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“Domestic and international equities continued their winning streaks last quarter, and fixed-income returns were also positive. But the decrease in yield curve level resulted in a 30 basis point drop in the effective interest rate, and increased the model pension plan’s liability, causing the overall fall in funding status,” said David Palmerino, vice president with Segal Marco Advisors.

National Retirement Practice Leader Stewart Lawrence suggests that plan sponsors examine changes in their own defined benefit plans for both accounting and funding metrics: “Any change in the either the shape or level of the yield curve, for example, could have a different impact on liabilities for plans with different maturities,” he noted. Mr. Lawrence also reiterated the importance of using both deterministic and stochastic asset-liability modeling as a means of projecting financial metrics defined benefit plans.

To speak with one of our experts about the model plan, and how it may inform plan sponsors’ decision-making, please contact Todd Kohlhepp.

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Segal Marco Advisors, a member of The Segal Group, provides trusted advice that improves lives. Segal Marco delivers innovative, client-driven investment consulting advice, outsourcing solutions, proxy voting and corporate governance services. Clients include joint boards of trustees administering benefit plans under the Taft-Hartley Act, state and local governments, corporations, non-profit organizations, endowments and foundations. The firm works with financial services firms through Rogerscasey, a Division of Segal Advisors, and with Canadian clients through Segal Rogerscasey Canada.