Articles | May 1, 2023
During the first quarter (Q1) of 2023, the funded status of the model pension plan examined in each issue of Prism rose by 1 percentage point, to 107 percent, as illustrated in the graph below.
This increase in funded status is attributable to a 6 percent increase in assets, partially offset by a 5 percent increase in liabilities.
1 The model plan’s portfolio has a simple, passively invested asset allocation of 45 percent to domestic equities, 15 percent to international equities and 40 percent to global bonds.
2 This is the ratio of a defined benefit (DB) plan’s assets to accrued liabilities. The funded ratio data in the graph is the ratio on the last day of each quarter. In May 2022 (after publication of the Q1 2022 Prism), the funded percentage for the model DB plan was reset as of January 1, 2022 to reflect the average actual funded percentage of large pension plans.
Source: Prism Review of First Quarter 2023
U.S. equity and fixed income both posted single-digit returns during Q1. U.S. equity markets were positive during a volatile quarter that was dominated by a regional bank crisis and investor expectations regarding whether Federal Reserve rate increases were ending.
Developed international and emerging market equities also posted positive single-digit returns during the quarter, with developed international stocks outperforming both U.S. and emerging market stocks. A modestly weakening U.S. dollar during the quarter provided a further tailwind for international markets.
Fixed income returns were positive in Q1 both domestically and internationally with interest rates moderating somewhat.
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.
Don't miss out. Join 16,000 others who already get the latest insights from Segal.