February may be the depths of winter, but the fortunes of pension plans were warm this year, say a variety of reports. “Pension finances enjoyed another month of positive experience in February,” said one report, summing up the month’s results.
Pension Plan Funding
October Three, which tracks a model plan that is traditionally invested and another that is more conservatively invested, in its February 2023 Pension Funding Update reports that the former improved 2% in February and the latter by a fraction of 1%.
Aon, which tracks daily funded status for S&P 500 companies with pension plans, reports a more modest aggregate increase in pension funded status of 0.6 percentage points in February from 94.4% to 95.0%. LGIM America’s Pension Solutions Monitor, which estimates the health of a typical U.S. corporate pension plan, also reports a slight improvement. They estimate that the average pension funding ratios increased through February 2023 by 0.1 percentage point from 99.8% to 99.9%.
And Sweta Vaidya, Head of Solution Design at Insight Investment, reports a more robust improvement in funded status in February of 1.4 percentage points from 102.5% to 103.9%.
Pension Liabilities
Insight Investment says that pension liabilities declined in February, driven by a 40-basis point increase in discount rates. Similarly, LGIM America as well as Aon said that plan liabilities fell because of rising discount rates.
The Year So Far
The good news is not isolated to just February, according to Aon. They report that so far for 2023, the aggregate funded ratio for 2023 has improved by 1.4 percentage points. Further, they say, the funded status deficit has fallen by $23 billion, due to asset increases of $18 billion and liability decreases of $5 billion.
The net effect of trends so far in 2023, says October Three, “has been a modest boost for pension finances in the first two months of the year.
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