Pension Indicator Updated for June 30, 2020

Economic Damage Starts to be Reflected in Pension Plans

By: Matthew Klein, Principal, Findley

Before reading, you may want to put on a mask.

We have now passed June 30th, the second biggest day of the pension year.  For plan sponsors with June 30 year-end dates, an update of the funded status will be reflected on the balance sheet.  Since that covers a big percentage of all plans, including an even higher percentage of non-profit and government plans, this will be the first major date that the economic turmoil of the last six months will flow through to the pension plan explicitly. 

“Now hold on a minute, Matt.  The stock market has come a long way since March 31st,” you might be thinking right now.  And you are half-right.  The Dow was up 17.8%1 in the second quarter.  The problem is it was -23.3%2 for the first quarter.  As those with background in investments know, it takes a bigger return to make an investor whole after a drop. [If an investor of $100 loses 20%, s/he is down to $80.  A 20% return from there only gets the investor back to $96.  It takes 25% return to get to even after a 20% loss.]  Still, the second half of 2019 was good for investors and the coming bad news will not be driven by asset losses even if they get the headlines.

No, the real devil in the next round of pension funded status reporting will be on the liability side of the ledger.  A typical pension plan could be looking at a 9%-12% (or more, depending on duration) loss due to historically low interest rates.  In the face of great uncertainty in the economy, there is tremendous money being put into bonds, driving yields down to unthinkable levels as little as six months ago.  The 30-Year US Treasury yield closed at 1.43% on June 30, 2020, versus 2.52% a year earlier3.

So if these sobering figures made you cringe and make several facial gestures, if you had your mask on, no one saw you.

From all of us at Findley 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.

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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 TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) -11.0% -8.1% -5.4% -2.4%
 Recently Frozen -12.4% -9.6% -6.9% -4.0%
 Ongoing Traditional -13.7% -11.0% -8.3% -5.5%
 Cash Balance -11.4% -8.6% -5.8% -2.9%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 1.2% 1.0% 1.1% 1.2%
 Recently Frozen 0.8% 0.6% 0.7% 0.8%
 Ongoing Traditional 0.4% 0.2% 0.3% 0.5%
 Cash Balance 1.1% 0.9% 1.0% 1.2%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -8.8% -6.1% -3.2% -0.3%
 Recently Frozen -11.5% -9.0% -6.1% -3.3%
 Ongoing Traditional
-14.1% -11.6% -8.9% -6.1%
 Cash Balance -9.4% -6.8% -3.9% -1.0%

Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31