ASPPA's recent article featured NEPC's Q3 Pension Monitor. View the piece here.
Corporate pension plans’ funded status did well overall in the third quarter, says a recent study.
Improvement in funded status in July and August was strong enough for there to be net gains for the quarter despite funding status losses in September, says the investment consulting firm NEPC.
NEPC notes that during the third quarter, “robust” equity returns fueled improvement in July and August, while stock market losses in September brought about the decline in funded status that month. Also during the quarter, NEPC says, estimated liability valuations increased by approximately 1%, a result they attribute to Treasury yields largely remaining unchanged as credit spreads contracted.
To help measure pension plans’ performance, NEPC uses two hypothetical plans: an open/total-return plan and a frozen/LDI-focused plan. During the third quarter, NEPC says that assets grew for both plans in July and August; liabilities grew in July and fell in August, and both assets and liabilities fell in September. The total-return plan showed a stronger third quarter net asset increase, 5.1%, than the LDI-focused plan’s 4%; the increase in the total-return plan’s liabilities for the quarter, 1.3%, also was slightly higher than the 1% increase in the LDI-focused plan’s liabilities.
Overall for the third quarter, says NEPC, the funded status of a total-return plan increased 3.2%, whereas that of the LDI-focused plan grew 2.8%.