Snow may have rained down in much of the country in abundance, but February was a hot month for private-sector pension plans, according to recent analyses. October Three, Wilshire and Aon report good news for private-sector DB plans in February.
How hot? In its report, Wilshire quotes Managing Director Ned McGuire as saying that the increased assets and falling liabilities they saw in February resulted in an estimated funded ratio that was “the highest since Wilshire began tracking in late 2014.”
Funding
October Three, which tracks two hypothetical plans—one traditionally invested, and one conservatively invested—reports that both plans’ funded ratios improved in February. Their traditionally invested plan improved 5%, and its conservatively invested counterpart improved by more than 1%.
Aon reports an improvement in the S&P 500 aggregate pension funded status of 2.8 percentage points during February from 101.8% to 104.2%. Wilshire also shows positive results in its analysis of the pension plans offered by the S&P 500. They report that those plans’ aggregate funded ratio increased by an estimated 3.4 percentage points in February, which means that by Feb. 29 that ratio stood at 109.4%.
Aggregate Funded Ratio. Aon, which looks at the results for pension plans run by the S&P 500, shows a similar improvement in the aggregate funded ratio—a jump of 3.3 percentage points, from 100.9% from Groundhog Day to 104.2% on Leap Day.
Wilshire shows an even bigger improvement in the aggregate funded ratio, also of the pension plans run by the S&P 500. They estimate that the aggregate funded ratio in February improved by 4.4 percentage points. The results are even more dramatic when one compares the S&P 500 pension funds’ aggregate funded ratio in February of this year and that of February 2023—Wilshire says that of February 2024 is 8.3 percentage points higher.
Assets and Liabilities
October Three says that for the first two months of this year, pension liabilities have fallen by 2%-4%, and that the decline in liabilities was most significant for long-duration plans. They report that assets improved in February, by 2% for its traditional plan; however, those of the conservative plan fell by 1%.
Wilshire attributes the improvement it found to a 2.8 percentage point decrease in liabilities and a 0.2 percentage-point increase in assets.
The improved funded status of $51 billion that Aon reports for the pension plans of the S&P 500 in February far outstripped January’s $14 billion. The February improvement, they say, was due to a $68 billion drop in liabilities minus a $17 billion drop in assets.
Aon noted that most plans in the United States remain exposed to interest rate risk. And because of that, they say, the drop in pension liability that resulted from increasing interest rates further bolstered the effect of slightly improved asset returns on the plans’ funded status.
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