Articles | November 7, 2024

Model Pension Plan's Funded Status Falls By 2 Points

During the third quarter (Q3) of 2024, the funded status of Segal’s model pension plan examined in each issue of Prism fell by 2 percentage points, to 105 percent, as illustrated in the graph below.

This decrease in funded status is attributable to an 8 percent increase in liabilities, outpacing a 7 percent increase in assets.

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Change in Assets, Liabilities and Funded Ratio

Q3 2024 Trends Graphic


Source: Prism Review of Third Quarter 2024

 

Aspects of investment performance that contributed to the model plan’s increase in asset value

Domestic equities again had positive returns in Q3, continuing a strong calendar year for U.S. stocks.

The U.S. jobs report came in weaker than anticipated and the Federal Open Market Committee cut the target range for the federal funds rate by 50 basis points to 4.75 – 5.00 percent. This was the first rate cut in more than four years.

Fixed income returns were mostly positive around the globe, following interest rates that moved down after policy rate cuts at many central banks (including those of the U.S.).

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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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.