We recently sat down with Justin Owens, our senior director and co-head of strategic asset allocation, to discuss the next phase of liability-driven investing (LDI) and the key trends driving this evolution. Below is a recap of our conversation.
U.S. corporate pension plan sponsors are required to measure their plan liabilities for a few important purposes.
The average expected return on asset (EROA) assumption for the largest U.S.-listed pension plan sponsors increased to 6.70% in 2023—the first time a year-over-year increase has been observed in 19 years of records.
We see both advantages and disadvantages to IBM's retirement program changes. One advantage is that more capital will be freed up for other corporate initiatives, while one disadvantage is that without a 401(k) match, participants may save less for retirement.
Starting in 2024, IBM will replace its 401(k) plan matching contributions with a new benefit earned within its overfunded DB plan, which has been frozen since 2008. This move essentially un-freezes the tech giant's DB plan.
We just finished up our annual report on the $20 billion club, and we've concluded that 2022 was a weird year for pension plans.
Corporate defined benefit (DB) plan sponsors face two primary risks: equity risk and interest rate risk.
10 years have passed since the watershed year for pension risk transfer.
Since 2011, we have issued annual reports on the largest listed corporate defined benefit (DB) sponsors in the U.S., codenamed the $20 billion club.
Despite stellar equity returns over the last decade, the funded status for many defined-benefit plan sponsors has either stagnated or fallen. Here's why.
Overall, the net effect of this is that funded status stayed roughly the same, likely frustrating sponsors who saw assets rise without a corresponding increase in funded position.
Among the 20 largest US-listed corporate DB sponsors, General Electric Company ended 2018 with the third lowest funded ratio at 75.6%.¹ This is a precipitous decline from 2007, when their funded ratio was the third highest among this group at 129.1%. Over that time period – when the average funded ratio dropped about 20 percentage points - GE's dropped by over 50 percentage points.¹ How did this happen?
Observing the latest developments of the largest corporate defined benefit (DB) plans in the U.S. offers a glimpse into the DB industry, and perhaps a foreshadowing of things to come. After two of the strongest years ever for pension contributions, the coming year may feature the weakest seen in a generation.
2017 was a record-breaking year for the $20 billion club—our name for the U.S. publicly-listed corporations with the largest pension liabilities—in at least five different ways. Contributions were double 2016 levels and nearly triple 2015 levels.
