Mixed Results for Corporate Pension Funded Statuses

Most pension trackers reported that equity markets performed well in August but were offset by an increase in liabilities.

The funding status for U.S. corporate pension plans in August saw mixed results, according to pension fund trackers. In general, equity markets experienced a positive performance over the month, and plan liabilities increased due to falling discount rates.

The Milliman 100 Pension Funding Index recorded its largest monthly drop this year, with the funded ratio dropping to 102.8% at the end of August from 103.6% at the end of July. Milliman found that although August’s investment gains of 1.81% lifted the plans’ market value by $17 billion, to $1.347 trillion at the end of the period, it was not enough to compensate for a 20-basis-point decline in discount rates for the month.

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As in July, both assets and liabilities increased during the month, but investment gains weren’t enough to offset liability increases,” said Zorast Wadia, author of the report, in a statement. “With markets falling from all-time highs and discount rates starting to show declines, pension funded status volatility is likely in the months ahead, underscoring the prudence of asset-liability matching strategies for plan sponsors.”

Russ Kamp, managing director of Ryan ALM Inc., wrote in blog post that falling rates are not a “panacea” for pension plans, unless the drop in rates rallies equity markets to a greater extent than the drop in rates impacts the growth in pension liabilities.

The WTW Pension Index also found that funded status decreased slightly in August. Like Milliman, WTW found that positive investment returns were more than offset by increases in liabilities due to decreases in discount rates, resulting in an index level of 116.0, a decrease of three-tenths of a percentage point over the prior month.

‘Tumultuous Month’

Agilis noted that most pension plans experienced relatively no change or a marginal decline in funded status in August as market returns matched or lagged slightly behind liability growth, depending on asset allocation. According to its analysis, Agilis reported Treasury yields moved lower again in August as the market reacted to Federal Reserve Chair Jerome Powell’s indication that the Fed will cut rates in September.

Agilis also stated that August was a “tumultuous” month for equity investors, with disappointing economic data and a weak U.S. jobs report coupled with an interest rate hike by the Bank of Japan. U.S. and international equities ultimately rebounded to post monthly gains, Agilis found.

“As we’ve been saying all year, volatility is going to be the biggest driver in pension plan funded status during 2024 and we continue to see that playing out,” said Michael Clark, managing director at Agilis, in a statement. “While August asset returns ended positive, the road was not without some significant bumps. September is keeping on theme with markets down in the first week. Any piece of economic data is causing reverberations in the markets and with interest rates, and we expect that will continue in the lead up to September’s Fed meeting and the November elections in the U.S.”

Mercer concluded in its analysis of S&P 1500 companies that the estimated aggregate funding level of pension plans remained level in August at 108% as result of a decrease in discount rates, offset by an increase in equity markets.

“Pension funded status for the S&P 1500 in August remained level due to equity market gains and lower interest rates,” said Scott Jarboe, a partner in Mercer’s wealth practice, in a statement. “Signals from the Fed indicate that rate cuts are imminent, which may result in lower short-term interest rates. However, the ultimate impact on pension plan funded status remains unclear as long-term interest rates play a more significant role.”

Jarboe added that plan sponsors should take a careful look at their plan’s interest rate risk, as plans with significant interest rate exposure may see decreases in funded status if long-term rates decline.

Asset Rise Still Outpaced Liabilities, per Wilshire

Meanwhile, a few firms found that funded statuses increased in August.

LGIM America’s Pension Solutions Monitor estimated that pension funding ratios increased slightly to 109.9% from 109.5% last month. While it found that both global equities increased 2.6% and the S&P 500 increased 2.4%, it recorded that plan discount rates were estimated to have decreased 19 basis points over the month, driven by the Treasury component falling 16 bps and the credit component tightening 3 bps.

Wilshire also found that the average funded ratio increased by an estimated 0.4 percentage points, ending the month at 102.3%. The increase in funded ratio resulted from a 1.7% increase in asset value, slightly offset by a 1.3% increase in liability value, according to Wilshire.

This is the eighth consecutive month that asset values rose more than liability values, Wilshire found.

Aon’s Pension Risk Tracker similarly found that the average funded ratio for pension plans increased to 100.7% from 97.8%. Aon recorded that the funded status improved by $46 billion, driven by liability decreases of $30 billion compounded with asset increases of $16 billion.

Aon also found that asset returns were up throughout August, ending the month with a 2.0% return.  

Retirement Industry People Moves – 9/13/24

OneDigital welcomes Andrea Madonna as benefits consultant in Florida; Bitzer, Cox Cuerington join Franklin Templeton; IRALogix taps Haas as CFO; and more.

OneDigital Welcomes Andrea Madonna as Benefits Consultant in Florida

Andrea Madonna

OneDigital has announced Andrea Madonna as a new benefits consultant. Joining the firm in Bonita Springs, Florida, Madonna has more than 20 years of strategic employee benefits experience.

“Andrea excels in building strong stakeholder relationships and possesses a robust analytical background. Her expertise spans COBRA, FMLA, Health, Life, Disability, Section 125, and ACA,” OneDigital shared in a statement. “Andrea’s passion for her role is driven by her commitment to innovative problem-solving and decision-making, ensuring her clients receive the best possible benefits solutions.”

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Bitzer, Cox, Cuerington Join Franklin Templeton as Client Advisers

Andre Cuerington

Emily Cox

Todd Bitzer

Franklin Templeton announced the appointment of Todd Bitzer, Emily Cox and Andre Cuerington as senior vice presidents and client advisers on its U.S. institutional team, all of whom joined the firm in August.

In their new roles, they will be responsible for managing the firm’s partnerships with existing and prospective institutional clients. Bitzer is based in Atlanta. Cox, who additionally serves as an alternative specialist, is based in Southern California. Cuerington is based in Northern California.

Bitzer and Cuerington report to Mike Foley, head of U.S. institutional, who oversees Franklin Templeton’s U.S. institutional direct sales, consultant relations and relationship management teams. Cox reports to John Ivanac, senior vice president and head of U.S. institutional alternatives on Foley’s team, focusing on the firm’s alternative investment capabilities.

“We continue to add experienced talent to further strengthen our team’s ability to create partnerships with institutional investors who are increasingly seeking to access the full value our firm can provide to them across both public and private investment markets,” Foley said in a statement.

WTW Appoints Horn as Missouri/Kansas Market Leader, Senior Retirement Consultant

Patty Horn

WTW, a global advisory and solutions company, announced the appointment of Patty Horn as Missouri/Kansas market leader and senior consultant in its retirement business within the health, wealth and career segment in North America.

In her dual role, Horn will serve as a strategic adviser to retirement clients and prospects within and beyond Missouri and Kansas. She is based in St. Louis. Horn will report to Pierre Jraiche, WTW’s managing director of retirement.

“We are delighted to welcome Patty to the WTW team,” Jraiche said in a statement. “Her extensive experience and exceptional leadership skills will be invaluable as we continue to strengthen our presence in the Missouri and Kansas markets.”

Horn joins WTW with more than 25 years of experience in retirement consulting. Prior to this, she served as the Missouri/Kansas Retirement practice leader and U.S. retirement innovation lead at Aon.

IRALogix Taps Haas as CFO

Keith Haas

IRALogix, a retirement industry fintech provider, announced the appointment of Keith Haas as chief financial officer. Haas assumed his new position September 3 and reports to Peter de Silva, CEO.

“We are excited to welcome Keith to the IRALOGIX team and are eager to leverage his passion, expertise, and financial acumen to drive our continued growth,” said de Silva in a statement. “With his extensive background in the tech industry and a proven track record of financial leadership, Keith is the perfect fit to help us achieve our strategic objectives.”

Most recently, Haas served as CFO of FutureView Systems, a provider of solutions that empower financial transformation of management and accounting processes through innovative technology.

“I’m excited to join IRALOGIX as CFO, especially at such a transformative time for our technology solutions to benefit the massive individual retirement account space,” Haas said in a statement.

AmericanTCS Welcomes Mike McAleer as Strategic Account Director

Mike McAleer

AmericanTCS, the outsourcing partner to retirement-focused financial services firms, announced the appointment of Mike McAleer as strategic account director.

McAleer joins AmericanTCS with 25 years of experience in the financial services industry and has held high-level sales and sales leadership roles across firms such as Lincoln Financial Group, Clark Capital Management Group, Charles Schwab and Russell Investments. McAleer’s diverse background includes experience in asset management, custody and trading, and qualified plans.

“I’ve had the pleasure of partnering with Mike for many years, and I’m excited to have the opportunity to work with him as a teammate,” said Brian Lenz, chief sales officer for AmericanTCS, in a statement. “He brings a wealth of experience, a wide network and a proven track record of success that will be instrumental in helping us continue to be the go-to partner in the retirement marketplace. Most importantly, he has an impressive repertoire of dad jokes.”

McAleer will be responsible for managing an existing book and growing key accounts across all of the firm’s retirement-centric business lines. He will support AmericanTCS partners, including retirement plan recordkeepers, TPAs, asset managers and banks.

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