Funded status for typical corporate pension plans changed only slightly in October, says a new study.
According to investment consulting firm NEPC, the funded status of a typical corporate pension plan increased by 0.9%, while that of a frozen pension plan focused on liability-driven investment (LDI) fell by 0.2%.
NEPC attributes the almost static funding status of a typical plan in October to an increase in interest rates happening at the same time equities declined; they also said that the losses in equities helped fuel the drop in the funded status of plans focused on LDI. This is a reversal of the equity returns in midsummer, which they called “robust” and which NEPC said was the grist for the improvement in funded status at that time.
Discount rates for these both hypothetical plans increased in October, NEPC reports:
| Plan | Discount Rate | Liability Value |
| Open total-return plan | + 16 basis points | -2.6% |
| Frozen LDI-focused plan | + 14 basis points | -1.6% |
The October results mark a staunching of the declines NEPC reported in September. They said that corporate pension plans’ funded status did well overall in the third quarter of 2020, but that was fueled by improvements in funded status in July and August; stock market losses in September resulted in a decline in funded status that month.
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