Archived Insight | August 17, 2021

Pension Plan Funded Status Drops Slightly

During the second quarter of 2021 (Q2), the funded status of the model pension plan examined in each issue of Prism dropped by 1 percentage point, to 99 percent, as illustrated in the graph below.

This issue of Prism explores the reasons behind this decrease, and what plan sponsors should examine in their own defined benefit plans.

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Changes in the yield curve

High-quality corporate bond yields dropped during Q2 — the net result of a 30 basis-point decrease in U.S. nominal Treasury yields and credit spreads that were mostly flat.

Changes in the shape of the yield curve may have varying impact on plans’ liabilities based on their maturity. (For background on yield curves read our primer.)

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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.