Articles | July 26, 2022

Model Pension Plan’s Funded Status Dips Slightly

During the second quarter of 2022, the funded status of the model pension plan examined in each issue of Prism fell by 2 percentage points, to 100 percent, as illustrated in the graph below.

This decrease in funded status is primarily attributable to a 13 percent decrease in assets, partially offset by a 12 percent decrease in liabilities.

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Changes in Assets Liabilities and Funded Ratio

Aspects of investment performance that contributed to the decrease in funded status

Equity and fixed income returns were again very poor across the board during Q2 as first-quarter losses accelerated into Q2.

U.S. equity markets entered bear market territory and are now more than 20 percent off their recent highs. Developed international and emerging market equities also performed very poorly but outperformed the U.S.

Fixed income returns were also poor again this quarter, both domestically and internationally, as interest rates continue their upward trajectory.

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.

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