Milliman, Inc. yesterday released the results of their 2020 Corporate Pension Funding Study (PFS), which analyzes the 100 largest U.S. corporate pension plans. The study highlighted the fact that the aggregate performance (17.3%) for this cohort was the second best annual return recorded during the life of this survey. Only 2003’s 19.5% performance topped 2019’s result.

Despite the significant return achieved last year that was well in excess of the average return on asset assumption (ROA), collective funding for the top 100 plans only modestly improved from 87.1% at 2018 year-end to 87.5% as of December 31, 2019. It once again highlights the fact that a review of asset performance alone only addresses one part of the pension equation. Failure to understand what is happening to plan liabilities often leads to uninformed decisions.

The good news coming from corporate America is their greater use of fixed income within the plans’ asset allocation schemes. According to Northern Trust’s review of their 300 large institutional universe, ERISA plans benefited from a large allocation to fixed income securities. The average plan had 40.4% exposure to fixed income at the end of the first quarter, compared to only 27% for the median public pension system. This additional exposure to fixed income certainly helped to prop up performance for corporate plans in the first quarter. As we highlighted yesterday, the average corporate plan within Northern’s universe outperformed the average public fund by more than 4% during the first 3 months.