November Pension Bounty Rather Lean

Private-sector pension plans’ fortunes improved slightly in November—not exactly a feast, but also not a famine. 

By a variety of measures, November’s results continued the rather indeterminate performance of U.S. private-sector pension plans that has held sway since August, when their results cooled from the stronger progress they saw in July. The October measurements, like those of September, had shown growth in some areas, and regression in others. 

Plan Funding 

October Three, which tracks two hypothetical plans—one traditionally invested and one conservatively invested—reports that they had different results in funded ratios in November. The traditional plan’s funded status dropped slightly—by less than 1%. The conservative plan, on the other hand, saw a slight improvement—also by less than 1%. Both show funding ratios above 100%. 

Insight Investment showed results very similar to those October Three reports. In their review of the top 100 corporate pension plans, Insight Investment found that in November, their funded status improved by 0.1 percentage points—from 108.1% on Halloween to 108.2% a week after Thanksgiving. Wilshire, too, reports similar figures—they estimate that in November, the aggregate funded ratio for U.S. corporate pension plans improved by 0.3 percentage points to 105.1%.

Agilis also reported mixed results in November. They noted that some plans' funded status improved, while that of others deteriorated. "Changes in funded status this month were not as clear cut and dry as they have been for earlier months of the year," said Agilis Managing Director Michael Clark. 

Funded status among the S&P 500 companies, Aon indicates, was not as relatively stable as that of the pension plans October Three, Insight Investment, Wilshire, and Agilis track. Aon’s pension tracker for November 2023 shows that funded status for the S&P 500 fell by 1.2 percentage points from 102.8% at the start of the month to 101.6% at its end. 

What was behind those results? 

October Three attributes them to lower interest rates, which it says pushed liabilities up while asset values grew due to the performance of the stock market. Aon says that the increase in pension liability that resulted from falling interest rates offset the positive effect growth in assets in November had on plans’ funded status. And Ned McGuire, Managing Director at Wilshire, in a press release attributed the improvement it found in funded ratios to lower Treasury yields and corporate bond spreads.

Assets 

Analysts were consistent in reporting that assets grew in November by approximately 7%. 

Aon showed an improvement of 7.4%; Insight Investment and Wilshire both reported that assets grew by 7.8%. October Three says that the assets of the conservatively invested plan it tracks grew by 6% in November, and those of the traditionally invested plan improved by 7%.

October Three attributes the improvement in assets that it noted to stock market growth.

Liabilities 

Analysts also showed similar results regarding liabilities in November. 

Aon’s pension tracker showed that liabilities in November grew by approximately 5%; Wilshire reports that liabilities grew by 7.4%; Insight Investment’s measurements showed that liabilities increased by 7.7%; and October Three said pension liabilities grew by 5%-9%. McGuire called the increase in liability values that Wilshire reported for November the biggest such monthly increase since December 2012. 

The Bigger Picture 

November—and the three months before it as well—may have shown rather stable, indeterminate results, but the overall trend for 2023 remains positive overall, analysts indicate. 

As the end of 2023 approaches, October Three says, the year appears to be another “solid” one regarding pension finances. This, it says, is because of higher interest rates and the performance of the stock market.

Aon has a similar report for the year as a whole. It says that so far for 2023, the aggregate funded ratio for S&P 500 U.S. pension plans in has improved by 3.7 percentage points, rising from 98.2% to 101.9%. Wilshire shows a more dramatic increase in aggregate funded ratio for the year so far, at 6.4 percentage points. 

Aon also reports that according to their pension tracker, for 2023 so far liabilities have fallen $64 billion and assets have dropped by $8 billion, for a net improvement in funded status of $56 billion.