We are happy to share with you the third quarter Ryan ALM Pension Letter. For public pension systems and multiemployer plans that continue to value plan liabilities under GASB using the ROA, liability growth using the return on asset assumption (ROA at 7.5%) is +5.92% year-to-date. However, if you use ASC 715 (FAS 158) or a true mark-to-market rate to (US Treasury STRIPS) plan liabilities have actually fallen by -5.1% and -5.3%, respectively.
With negative growth rates for liabilities, funded ratios can improve rather dramatically with even modest asset growth. Think that US interest rates might continue to rise from these levels? If so, having a true (and better) understanding of liability growth will assist you in making more informed investment structure and asset allocation decisions.
Despite the recent outperformance of assets versus liabilities, liability growth has outperformed asset growth by more than 120% since 2000.