Articles | January 26, 2024

2-Point Decline in Model Pension Plan’s Funded Status

During the fourth quarter (Q4) of 2023, the funded status of the model pension plan examined in each issue of Prism fell by 2 percentage points, to 106 percent, as illustrated in the graph below.

This decrease in funded status is attributable to a 12 percent increase in liabilities, outpacing a 10 percent increase in assets.

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Change in Assets, Liabilities and Funded Ratio

Change in Assets, Liabilities and Funded Ratio graph

Source: Prism Review of Fourth Quarter 2023


Aspects of investment performance that contributed to the model plan’s increase in asset value

Both domestic and international equities had double-digit positive returns in Q4 to close out a blockbuster calendar year of return(s) for both.

Emerging market equities were the laggard this quarter (and this year), underperforming both U.S. and developed international stocks, although emerging markets also posted positive returns.

Fixed-income returns were also stellar both domestically and internationally, with interest rates retreating around the globe during the quarter.

Examine your own DB plan’s experience

Plan sponsors should examine changes in their own DB plans’ assets, liabilities and funded ratios from the vantage point of both accounting and funding metrics.

We can help employers project their DB plans’ funded ratios with a complete view of the range of a plan’s possible future statuses, presenting early warning signs of potential challenges.

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The information and opinions herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This article and the data and analysis herein is intended for general education only and not as investment advice. It is not intended for use as a basis for investment decisions, nor should it be construed as advice designed to meet the needs of any particular investor. On all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.

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