Pension Indicator Updated for December 31, 2021

A Great 2021 Sets Up Opportunities for 2022

By: Matthew Klein, Principal, USI Consulting Group

As we wrap-up 2021, regardless of what happened in other aspects of life, pension plan sponsors had many reasons to be excited. For plan sponsors that were struggling, the American Rescue Plan Act provided funding relief and even allowed retroactive changes to help those hardest hit by the pandemic. This same bill also provided a much-needed release valve for struggling multiemployer plans.

While interest rates were somewhat volatile during 2021, the 10-year Treasury finished about 50 basis points higher at the end of the year compared to the start. We observed similar movements with corporate bonds as well1.

For equities, most sectors did well, highlighted by the S&P 500 moving up over 25% during 20212. For the S&P 500, this marks a third straight year of good returns. As a result, most plan sponsors find themselves in the best funding position for their DB plans in many, many years. 

With the extra money, we saw many plan sponsors look to remove risk off the table. LIMRA reported that Q3 group annuities jumped a staggering 243% over Q3 20203

It doesn’t take a crystal ball to presume plan sponsors will continue to de-risk and right-size their pension obligations in 2022 barring an unforeseen shift in the economy. For plan sponsors that have been on a glide-path strategy, you will want to review if you should be adjusting your target allocations. In short, with more money comes more options, and plan sponsors should make it a priority to review their options in 2022.

Happy New Year!

From all of us at USI Consulting Group and Clearstead, we hope everyone and their families are safe and healthy. 

As always, thanks for reading, and drop us a comment on how we're doing.

This email address is being protected from spambots. You need JavaScript enabled to view it. or Clearstead to discuss this information further.

For more information on the development of the Pension Indicator, please see our Disclosure document.

Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance.  Past performance is not indicative of future results.

1http://credittrends.moodys.com/

2Bloomberg

3https://www.limra.com/en/newsroom/news-releases/2021/secure-retirement-institute-third-quarter-2021-u.s.-single-premium-pension-buy-out-sales-more-than-triple-prior-year-sales/

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) 15.2% 12.0% 8.0% 3.4%
 Recently Frozen 16.0% 12.7% 8.7% 4.0%
 Ongoing Traditional 16.8% 13.5% 9.4% 4.7%
 Cash Balance 15.6% 12.4% 8.4% 3.7%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 3.2% 2.4% 1.5% 0.5%
 Recently Frozen 3.7% 2.9% 2.0% 0.9%
 Ongoing Traditional 4.1% 3.3% 2.4% 1.4%
 Cash Balance 3.3% 2.5% 1.6% 0.5%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 15.2% 12.0% 8.0% 3.4%
 Recently Frozen 16.0% 12.7% 8.7% 4.0%
 Ongoing Traditional
16.8% 13.5% 9.4% 4.7%
 Cash Balance 15.6% 12.4% 8.4% 3.7%


Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure