Articles | February 3, 2025
Model Pension Plan’s Funded Status Increases by 5 Points
During the fourth quarter (Q4) of 2024, the funded status of Segal’s model pension plan examined in each issue of Prism rose by 5 percentage points, to 110 percent, as illustrated in the graph below.
This increase in funded status is attributable to a 7 percent decrease in liabilities, partially offset by a 2 percent decrease in assets.
Change in Assets, Liabilities and Funded Ratio
Source: Prism Review of Fourth Quarter 2024
Aspects of investment performance that contributed to the model plan’s decrease in asset value
Domestic equities had positive returns for a fifth consecutive quarter, closing out another strong calendar year for U.S. stocks. Internationally, equity market performance was poor, with both developed international stocks and emerging market stocks posting negative returns for the quarter that fell well short of domestic equities.
At their December meeting, the Federal Open Market Committee announced a third consecutive rate cut that was widely anticipated by 25 basis points, lowering the target range for the federal funds rate to 4.25-4.50 percent. They also provided forward guidance that anticipates much slower rate easing during 2025.
Fixed income returns were mostly negative around the globe, following interest rates that moved higher after many central banks (including in the U.S.) appear to be nearing the end of their rate-easing cycles.
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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The information and opinions herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This article and the data and analysis herein is intended for general education only and not as investment advice. It is not intended for use as a basis for investment decisions, nor should it be construed as advice designed to meet the needs of any particular investor. On all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.
