Articles | November 1, 2023
3-Point Rise in Model Pension Plan's Funded Status
During the third quarter (Q3) of 2023, the funded status of the model pension plan examined in each issue of Prism rose again, by 3 percentage points, to 108 percent, as illustrated in the graph below.
This increase in funded status is attributable to a 4 percent decrease in assets and a 7 percent decrease in liabilities.
Change in Assets, Liabilities and Funded Ratio
Source: Prism Review of Third Quarter 2023
Aspects of investment performance that contributed to the model plan’s drop in asset value
Both domestic and international equities had negative single-digit returns in Q3, the first negative quarter for equities this year.
Emerging market equities outperformed both U.S. and developed international stocks, although all three posted negative returns. Rising bond yields were the key factor driving negative market performance.
Fixed-income returns were again negative both domestically and internationally, with interest rates spiking higher 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.
