Wilshire Estimates Three Percentage Point Increase in Aggregate Funded Ratio for U.S. State Pension Plans in the Fourth Quarter of 2022, but a Greater Than 18 Percent Decrease for the Calendar Year.
The aggregate funded ratio for U.S. state pension plans increased by an estimated 3.1 percentage points during the fourth quarter of 2022 to end the quarter at 68.4%, an 18.3% decrease 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 providing secure and safe retirements for millions of Americans, including those participating in some of the nation’s largest corporate and public retirement plans.
The quarterly change in funding resulted from a 5.2% increase in asset values partially offset by a 0.5%increase in liability values. Although the aggregate funded ratio is estimated to have increased by 3.1% during the fourth quarter, it is estimated to have decreased by 18.3%over the calendar year 2022.
“This marks the first quarterly increase in funded ratio since the fourth quarter of 2021,” stated Ned McGuire, Managing Director, Wilshire. “Calendar year 2022 caps a volatile year for markets with the FT Wilshire 5000 Index ending 2022 down 19%, which is its fourth worst calendar year return. This quarter’s ending funded ratio has fallen to its level at the end of the second quarter of 2020 after the onset of COVID-19.” 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 state pension plans included in Wilshire’s 2022 state funding study. The funded ratio is based on liabilities, service cost, benefit payments and contributions inline with Wilshire’s 2022 state funding study.
The assumed asset allocation is below:
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