Pension Indicator Updated for June 30, 2018

Pension Funded Status Heating Up

By: Matthew Klein, Principal, Findley

Plan sponsors with June 30 fiscal year-end reporting dates will feel good about the final results this year.  All sixteen of our breakdowns finished in positive territory, with more aggressive portfolios doing better than LDI models.  This really should not be a surprise to anyone.  The goal of LDI is to chop off the downside risk as much as possible, and with continuing strength in domestic equities (albeit mostly in 2017), risk-takers were rewarded.

Interest rates are experiencing a pretty steady climb over the past six months as well.  For example, in our Ongoing plan model, the underlying discount rate has improved from 3.59% at December 31, 2017 up to 4.13% as of June 30, 2018, an increase of 54 bps.  Depending on the duration of your liabilities, this would generally equate to a 6-9% decrease in liability.

Hope all of you have a relaxing and warm rest of the summer because school bells will be ringing again before we know it.

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

1 Citi Pension Liability Index, as of 5/31/2018

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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.

Year to Date Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 4.8% 4.0% 2.0% -0.7%
 Recently Frozen 6.7% 5.8% 3.8% 1.1%
 Ongoing Traditional 8.7% 7.9% 5.8% 3.1%
 Cash Balance 5.4% 4.5% 2.5% -0.1%
Month-over-Month Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 1.0% 0.9% 0.5% 0.0%
 Recently Frozen 1.4% 1.3% 0.9% 0.5%
 Ongoing Traditional 1.9% 1.8% 1.3% 0.9%
 Cash Balance 1.1% 1.0% 0.6% 0.2%
12-Month Change Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 12.1% 10.6% 8.4% 5.1%
 Recently Frozen 12.4% 10.9% 8.7% 5.4%
 Ongoing Traditional
12.7% 11.2% 9.1% 5.8%
 Cash Balance 12.4% 10.9% 8.8% 5.4%