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Federal Reserve Has Some Good News on Private Pension Funds

The Board of Governors of the Federal Reserve in its latest quarterly report about U.S. financial accounts, provides information on how defined benefit funds fared from a variety of perspectives during the fourth quarter of 2015. The report, “Financial Accounts of the United States: Flow of Funds, Balance Sheets and Integrated Macroeconomic Accounts, Fourth Quarter 2015,” was issued on March 10.

Total financial assets of private pension plans have grown since 2011. By the fourth quarter of 2015, those assets amounted to $3.141 trillion.

Contributions from employers and households have grown consistently since 2005 and have exceeded claims against private pension systems since 2005; however, employer contributions alone have not.

Liabilities also have been growing, but the net difference between asset growth and liabilities has improved. There was a net increase in liabilities of $46.6 billion in 2011, and $22.6 billion in 2012; but starting in 2013, plan funding exceeded liabilities. In 2013, the overfunding amounted to $7.9 billion; in 2014, $22.5 billion. The positive balance held steady in 2015 at $22.6 billion in each quarter.

The report also sheds light on how private pension funds are invested. The investments included the following in 2015:

  • corporate equities: $1.1 trillion
  • debt securities: $872.5 billion
  • mutual fund shares: $394.4 billion
  • money market fund shares: $33.4 billion
Private pension plans have invested far less in U.S. Treasury bonds and securities than have the federal, state and local government pension systems. In 2015, the private pension investment in such bonds collectively amounted to $7.4 billion, but $5.7 billion in the fourth quarter; the investment in Treasury securities stood at $198.6 billion in 2015, and $197.2 billion in the fourth quarter.