NEPC’s quarterly pension funded status monitor tracks the funded status of two hypothetical plans to gauge the impact of movements in markets, interest rates, and credit spreads on pension plans. The funded status of a typical corporate pension plan experienced steep declines in the first quarter as assets took a nosedive amid intensifying concerns around the COVID-19 pandemic, with the funded status of a total-return plan falling by around 8.7%. However the funded status stayed remarkedly stable for plans with higher interest rate hedge ratios and lower equity allocations, according to NEPC’s hypothetical open- and frozen-pension plans.

The funded status of a total-return plan fared worse than a hedged plan as equities sold off amid mounting concerns around the COVID-19 outbreak; falling Treasury yields were offset by widening credit spreads for plan liabilities.

The LDI-focused plan experienced much less volatility in funded status due to its lower equity allocation and the rally of Treasury bonds amid a flight to quality. The plan is 75% hedged, as of March 31.

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