DB Liabilities Outpace Assets

March 6, 2002 (PLANSPONSOR.com) - The gap between defined benefit plan assets and liabilities widened to -4.4% in February, leaving plan sponsors concerned over appropriate asset allocations in the face of rising obligations, according to Ryan Labs Inc.'s Asset/Liability Watch.

So far this year, the present value of future benefit obligations for pension plans has grown by 2.73%, while assets have shrunk by 2.73%, as measured by the group’s asset allocation model.

Much of the disparity is due to the investment performance of equities versus fixed income.

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Liabilities are represented by a long zero coupon bond portfolio as defined by the FASB, so “when the two run counter clockwise to one another a pension plan cannot succeed. The fixed income component within the asset portion is not nearly enough to improve relative returns significantly. The liabilities on the other hand are totally dependent upon the shape and status of the yield curve,” Ryan Labs notes.

On a year to date basis:

  • the S&P 500 has lost -3.36%
  • the MSCI EAFE has fallen by -4.64%
  • while the Lehman Aggregate has increased by 1.79%
  • cash has earned 0.25%.

SURVEY SAYS: March Madness

March 15, 2001 - The waiting (for some) is over (for others it is just beginning)--March Madness is now upon us. Nearly 61% of this week's respondents are participating in a pool, compared with 39% that are abstaining (roughly the reverse of last year's survey results, interestingly enough). The vast majority picked Duke to win it all, with Maryland and Stanford distant seconds. Also cited were Kentucky, Iowa, Michigan State and North Carolina.

From an economic standpoint, the average entry fee was $11.68, but the most popular answer was $5. Payoffs were all over the board ? and generally dependent on the final number of contestants (many open until tip-off today). However, the average was nearly $500! One reader noted that “gambling is illegal, just the awe of my fellow workers is enough.” But perhaps the best response was the reader who said, “it doesn’t even matter.”

Thanks to everyone that participated in our survey!

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