Corporate Pension Plans Hit Highest Funding Levels in Decades

Higher stocks and relatively stable interest rates boosted funding surpluses to more than $70 billion, Milliman found.

The funded status of the largest U.S. corporate defined benefit plans continues to push into surplus status. According to a number of pension trackers, funded status is reaching all-time highs.

Strong equity returns in March and throughout the first quarter of the year contributed to pension surpluses. Strategists are recommending corporate pension sponsors consider making liability-matching allocations to maintain funding levels when anticipated rate cuts materialize later this year.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

WTW

WTW’s pension index, which tracks the funded status of a hypothetical 60/40 portfolio increased to 114.3 at the end of March, a 1.1-point increase from February. Funding surplus in the index reached its highest level in two decades, per WTW. That is up from a near-term low in 2020, when funded status was just over 65 points.

WTW’s benchmark portfolio returned 2.4% in March, with equities returning 3.4% and fixed income returning 0.9%.

Milliman

Funded status of the largest corporate defined benefit plans rose to 105.6% in March, up from 105.3% the previous month. Milliman, which tracks the funded status of the largest 100 U.S. corporate DB plans through the Milliman 100 pension funding index says this 0.3% increase in funded status represents a $5 billion increase in the spread between plan assets and liabilities.

In total, these pensions were $73 billion in surplus at the end of March, up from a $68 billion surplus at the end of February. In total, there were $1.373 trillion in plan assets as of March 31, and $1.299 trillion in plan liabilities. These figures increased $19 billion and $14 billion respectively, month over month.

“Pension funded status improved for all three months of the first quarter, and strong market returns helped to offset the effect of March’s discount rate declines,” said Zorast Wadia, principal and consulting actuary at Milliman and author of the monthly PFI. “However, if the Fed cuts rates as expected and corporate bond discount rates continue to fall, the funded status gains may dissipate unless plan sponsors adhere to liability-matching investment strategies.”

 
Agilis

Strong equity returns have boosted the funded status of corporate pension, Agilis writes in its monthly U.S. Pension Briefing. Equities returned 10% for the year, with U.S. equities returning 3.2% in March.

“March was another good month for pension plan funded status with market gains generally outpacing liability growth due to small declines in discount rates. Both the Fed and the markets are posturing for second-half 2024 interest rate cuts, meaning that now is the time for pension plan sponsors to give serious consideration to increase allocations to liability-matching assets to protect funded status gains realized over the last year,” wrote Agilis Chief Commercial Officer Michael Clark in the report.

MetLife Investment Management

MetLife Investment Management, which tracks the funded status of U.S. corporate pension plans quarterly, found the funded status of 500 companies within the Russell 3000 index rose to 104.8% at the end of the first quarter of 2024.

“Pension assets rose during the first quarter as a result of positive equity and alternatives performance,” wrote Stephen Mullin, head of High-Grade Strategies at MIM, in a report.

Funded status, according to MIM, peaked for the quarter at 105.2% on March 21, and hit a low of 100.4% on January 19. Pension discount rates fluctuated between 4.93% at the beginning of the quarter to 5.18% at the end of the quarter, reaching a high of 5.38% on February 13.

Wilshire

Wilshire estimates that corporate plan funding increased by 1 percentage point in March, rising to 110.1%. The firm, which tracks the funded status of DB plans from within the S&P 500, says that funded status has increased by 5.1 points year to date. According to Wilshire’s tracker, funded status increased a total of 6.3 points during 2023.

The 1-point increase in funded status was due to a 1.7% increase in the liability of plan assets, offset by a 0.8% in the value of plan liabilities.

“With the second consecutive month, and quarter, of positive asset returns, U.S. corporate pension plans have continued their 15-month streak of overfunding with the estimated funded ratio at its highest month-end level in several decades,” wrote Ned Mcguire, managing director at Wilshire, in the monthly report.

LGIM America

DB plans saw their funded status increase to 108.2% in March from 107.3% in February, according to LGIM America’s Pension Solutions Monitor.

Strong equity returns boosted plan assets, with global equities returning 3.1% and the S&P 500 returning 3.2% during the month. According to LGIM’s benchmark, which tracks a 50/50 portfolio, plan assets increased 2.4%, while liabilities increased 1.5%, resulting in a 0.9% increase in funded status in March.

Insight Investment 

According to Insight Investment, which tracks the funded status of U.S. corporate pension plans in its monthly funded status update, funded status for these plans increased 0.5% to 112.2% in the month of March. Insight Investment attributed this growth to strong returns from growth assets. Assets returned 2.3%, while pension liabilities returned 1.8% at month end, resulting in a 0.5% increase in funded status.

According to Ciaran Carr, head of the client solutions group at Insight Investment, many plan sponsors are reviewing their options and what to do with their funding surplus.

“The client conversation around end-state solutions has started to shift to incorporate a wider menu of options available to the sponsor and participants. There is a greater focus today on discussing alternative options to a pension risk transfer in the US DB market now that many plans are in surplus and can think of pension surplus as an asset that can help benefit the participant,” Carr wrote in the report. 

October Three

Funded status of corporate plans increased for both a traditional 60/40 portfolio and fixed income heavy portfolios, according to October Three’s monthly Pension Finance Update, which tracks the performance of hypothetical corporate pension plans.

October Three tracks two hypothetical plans, Plan A, a plan with a 60/40 asset allocations saw its funded status increase just under 1%, as did Plan B, a largely retired plan with a 20/80 allocation. Equities increased 3% in March, with bonds increasing 1%.

October Three’s Plan A portfolio saw a 2% increase in March, up 4% for the year. Plan B saw a 1% increase during March, although it is only up less than 1% for the year, due to a 1-3% decline in bonds.

Mercer

The funded status of corporate pension plans decreased by 2% in the month of March, declining to 107%, according to Mercer, which tracks the funded status of corporate DB plans of companies in the S&P 1500.

This decline in funded status was attributed to a decrease in discount rates, which was offset by strong equity returns. According to Mercer, the funding surplus of companies in the S&P 1500 decreased to $114 billion at the end of March from $137 billion at the end of February.  

“Pension funded status for the S&P 1500 fell 2 percent in March as a good month for equities was offset by interest rate decreases,” wrote Matt McDaniel, partner and U.S. pension strategy and solutions leader at Mercer, in a release. “Equity markets continued to climb last month with the S&P 500 reaching a new all-time high to close out the month of March. However, interest rates decreased, leaving funded status lower to end the first quarter.”

Retirement Industry People Moves

IRALOGIX names a new CEO; Concurrent selects a new director of retirement plan services; an employee benefits and executive compensation attorney joins Ballard Spahr; and more.

IRALOGIX Announces New CEO

Peter de Silva

The retirement industry fintech provider of white-label IRA programs announced that Dave Bernard stepped down as chief executive officer effective immediately. The board has appointed Peter de Silva as the new CEO; De Silva has been an IRALOGIX investor and board member for the past two years. 

“During his tenure, Dave has been instrumental in not only building out a great product and a cutting-edge technology platform but also assembling a very talented group of employees and senior leaders,” said Jim Smith, an IRALOGIX board member, in a press release. 

Get more!  Sign up for PLANSPONSOR newsletters.

De Silva has more than 35 years experience leading established companies in the financial services industry, including roles as president of TD Ameritrade’s retail business, president of Scottrade Financial Services, CEO of UMB Bank, and 17 years of experience at Fidelity Investments in various leadership roles. 

Farrell Named Director of Retirement Plan Services at Concurrent

Andrew Farrell

Andrew Farrell, previously a retirement plan adviser at NEXT Retirement Solutions, announced that he is starting a new position as director of retirement plan services at Concurrent. 

“Building the Concurrent Retirement department and platform from the ground up over the last year has been [an] exciting and demanding challenge,” Farrell wrote in a LinkedIn post.  

According to NEXT Retirement, Farrell has 15 years of experience specializing in the qualified retirement plan market as an adviser and plan manager.  

In his new role, Farrell is in charge of coordinating and overseeing all qualified advisory activity within Concurrent Investment Advisors, as well as establishing, maintaining and evolving Concurrent’s platform of tools, partners and services. 

Employee Benefits and Executive Compensation Attorney Joins Ballard Spahr

Christian Fox

Christian Fox, an employee benefits and executive compensation attorney with almost three decades of experience with ERISA, health and welfare plans and both defined benefit and defined contribution retirement plans, joined Ballard Spahr as Of Counsel in its Business and Transactions Department and Employee Benefits and Executive Compensation Group. 

Fox has conducted due diligence reviews of plans, programs and agreements; drafted and negotiated benefits aspects of purchase and merger agreements; managed participant appeals and litigation, government inquiries, and audits; and written HIPAA policies and procedures. She joins Ballard Spahr from a large, publicly traded transportation company, where she served as in-house benefits counsel for more than a decade.  

At Ballard Spahr, Fox will handle matters pertaining to retirement plans, executive compensation packages and health and welfare plans. 

Agilis Hires Senior Consultant from Mercer 

Agilis announced that Scott Carroll joined the firm as a senior consultant in their Boston office. In his new role, Carroll will consult with clients on all aspects of defined contribution plans.  

Before joining Agilis, Carroll was a principal with Mercer leading their DC Mid-Market Team in the northeast. 

“We are delighted to welcome Scott to the Agilis team, a testament to the growing appeal of our customized services and vision,” said Michael Clark, chief commercial officer at Agilis, in a statement. “For over two decades, Scott has worked with plan sponsors during times of change, including periods of rapid growth, mergers and acquisitions, and divestitures. His expertise will be invaluable as we navigate an increasingly complex landscape of investing and retirement planning for our clients. Scott’s experience with defined contribution plan investments, administration and recordkeeper systems complements our existing team’s strengths, and allows us to dedicate additional expertise in the Pooled Employer Plan market.” 

Caroll has over 25 years of experience with the design, installation, investments and administration of DC plans. He provides consulting on projects like pooled employer plan searches, recordkeeper searches, plan harmonization projects and plan design studies. 

Hub International Names New CMO and Managing Director of M&A

Ellina Schinnick

Clark Wormer

The global insurance brokerage and financial services firm announced the appointment of Ellina Shinnick as chief marketing officer and Clark Wormer as the managing director of mergers and acquisitions, to HUB’s executive management team.

As HUB’s chief marketing officer, Shinnick will lead the strategy for both the HUB and VIU by HUB brands. Since joining HUB in 2015, Shinnick has built HUB’s Marketing Center of Excellence and has helped advance HUB along its digital journey, investing in the latest marketing technology and skillsets that enable HUB to connect with and serve its changing client base. Shinnick also successfully led the design and launch of multiple HUB brand refreshes, including the newest brand – VIU by HUB. 

Wormer joined HUB in 2005. In his new role, Wormer is responsible for corporate development and will oversee the team responsible for identifying potential partners, developing and negotiating deal structures, analytics and modeling, due diligence and execution of transactions. Wormer has also led HUB’s M&A team since 2018 and has been involved in more than 800 transactions totaling over $2 billion in acquisition revenue.  

The Carson Group Adds Fava, Carter to Executive Team

Dani Fava

Heather Randolph Carter

The financial services firm announced that Dani Fava has stepped into the vacated role of chief strategy officer, and Heather Randolph Carter will join the firm as chief marketing officer.

Fava, who comes to Carson from Envestnet, will “help steer’ the firm’s strategic direction, identify new growth opportunities and drive innovation across the organization,” according to a press release. 

Carter will spearhead Carson’s integrated marketing and communications strategies as the organization expands. She will also oversee brand development, adviser marketing, digital marketing, public relations, internal communications and corporate events. 

Most recently, Carter served as LPL Financial’s chief marketing and communication officer. 

Vestwell Names Rudy Grodzen as Regional Vice President

Vestwell announced it hired Rudy Grodzen as regional vice president. Prior to Vestwell, Grodzen was a senior retirement plan specialist at ADP.

Grodzen started on April 1 and reports to Tim Susoev. He is responsible for covering advisors and TPA partners for the Southern California and Hawaii Territory.

Josh Forstater, Vestwell’s managing director and head of workplace sales and distribution said in a statement, “Rudy’s extensive sales experience, strong relationships in California, and background at top-tier firms impressed us. We’re looking forward to seeing Rudy partner with advisors in the Southern California region here at Vestwell.”

 

«