Articles | August 6, 2024

3-Point Rise in Model Pension Plan's Funded Status

During the second quarter (Q2) of 2024, the funded status of the model pension plan examined in each issue of Prism rose by 3 percentage points, to 107 percent, as illustrated in the graph below.

This increase in funded status is attributable to a 1 percent increase in assets and a 1 percent decrease in liabilities.

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Q2 2024 3-Point Rise in Model Pension Plans Funded Status

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Change in Assets, Liabilities and Funded Ratio

Source: Prism Review of Second Quarter 2024

Aspects of investment performance that contributed to the model plan’s increase in asset value

Domestic equities again had positive returns in Q2, continuing a strong calendar year for U.S. stocks.

U.S. unemployment remains low, inflation remains muted and corporate profits remain strong (although somewhat concentrated with the largest companies) — all supporting strong market performance.

Fixed income returns were mostly negative around the globe, with interest rates ticking slightly 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.