Wilshire Estimates Almost One Percentage Point Decrease in Aggregate Funded Ratio for U.S. Corporate Pension Plans in December, but More Than Two Percentage Point Increase for the Calendar Year.
The aggregate funded ratio for U.S. corporate pension plans decreased by an estimated 0.7 percentage points month-over-month in December to end the month at 98.6 percent, a 2.4 percentage point increase from December 2021, according to Wilshire, a diversified global financial services firm. Through its suite of Outsourced Chief Investment Officer (OCIO) and advisory services, Wilshire assists in helping secure safe retirements for millions of Americans, including those participating in some of the nation’s largest corporate and public retirement plans.
The monthly change in funded ratio resulted from a 2.6 percent decrease in asset values partially offset by a1.9 percent decrease in liability values. The aggregate funded ratio is estimated to have increased by 3.2 and 2.4 percentage points during the fourth quarter and over the calendar year 2022, respectively.
“December caps a volatile year for markets with the FT Wilshire 5000 Index ending 2022 down 19%, which is its fourth worst calendar year return, and a decrease in liability value resulting from a more than 200 basis point increase in corporate bond yields used to value corporate pension liabilities,” stated Ned McGuire, Managing Director, Wilshire. “Despite the FT Wilshire 5000 Index posting its worst annual returns since 2008 and the second consecutive annual decline for fixed income, December’s funded ratio remains close to its highest level since year end 2007,”Mr. McGuire added.
A 12-month review of the funded ratio follows:
The aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration inline with the FTSE Pension Liability Index – Short. The funded ratio is based on the FTSE – Short Liability, with service cost, benefit payments and contributions in line with Wilshire’s 2022 corporate funding study. The most current month-end liability growth is estimated using a FTSE Pension Liability Index– Short duration matched weighting of the Barclays Long & Intermediate Aa+ U.S. Corporate Indices.
The assumed asset allocation is below:
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