According to a recent P&I article, three different reports on the funded status of Corporate DB plans highlighted the fact of what we at Ryan ALM have been stating, February was ugly, and this for a universe of pension plans that in many cases have taken steps to de-risk. Studies by Wilshire, Northern Trust, and Mercer each indicated that falling asset levels and rising liabilities combined to reduce funded ratios by anywhere from 5% (Mercer) to 3.9% (Wilshire) within the month. The aggregate funding for Corporate DB plans is somewhere between Mercer’s 79% to Northern Trust’s 81.3%.
The start to 2020 is the worst beginning of a calendar year for corporate funded ratios dating back to January 2013 when Wilshire began reporting on the funded status of corporate DB plans. Mercer estimated that the significant decline in funded ratios increased the funding deficit for the S&P 1,500 companies by $125 billion, bringing the total deficit to $527 billion.
As we reported yesterday, multiemployer and public pension systems that have been slow to develop de-risking strategies will have seen as much as a 17% shortfall in their funded status, according to the Ryan ALM pension monitor. Pension systems should not be subjected to the whims of the market as they have been. This volatility in funded status manifests in escalating contribution expenses.