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.

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Change in Assets, Liabilities and Funded Ratio

Q3 2023 Change in Assets, Liabilities and Funded Ratio graph

 


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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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.