Wilshire estimates 1.1 percentage point increase in aggregate funded ratio for U.S. corporate pension plans in January.
Santa Monica, Calif., February 2, 2024 – The aggregate funded ratio for U.S. corporate pension plans increased by an estimated 1.1 percentage points in January, ending the month at 106.1%, according to Wilshire, a diversified global financial services firm. Wilshire assists in providing a suite of OCIO and advisory services to some of the nation’s largest retirement plans which help fund the retirement of millions of Americans.
This month’s funded ratio change reflects a 1.9% decrease in liability value, partially offset by a 0.7% decrease in asset value. The aggregate funded ratio is estimated to have increased by 5.6% over the trailing twelve months.
"January’s funded status increase was the result of a decrease in liability value due to the increase in corporate bond yields used to value corporate pension liabilities," commented Ned McGuire, Managing Director at Wilshire. "Although U.S. equity returns represented by the FT Wilshire 5000 were positive, negative returns for most other asset classes resulted in the total asset value decreasing. However, due to the larger decrease in liability values, the estimated funded ratio increased and remains at its highest month-end level in a couple decades," added Mr. McGuire.
A 12-month review of thefunded 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 in line 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 2023 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 and Intermediate Aa+ U.S. Corporate Indices.
Wilshire’s practice is to collect data on U.S. pensions from 10-K filings for companies in the S&P 500 Index at fiscal year-end (FYE). All data for fiscal year 2022 is based on the 253 S&P 500 Index constituents that maintain defined benefit pension plans as of year-end 2022. The estimated monthly funded ratios are based on liabilities, service cost, benefit payments and contributions in line with Wilshire’s 2023 corporate funding study.
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