Mild Ides of March for DB Plans

Beware the Ides of March, the adage goes. This year, at least, they were nothing to fear—private-sector pension plans had a good month, according to recent analyses. 

Or rather, another good month, since their March performance is a continuation of the warm winter private-sector DB plans had. Three analysts reported that private-sector DB plans’ funded ratios showed around 1% improvement in January, and February was such a good month for private-sector pension plans that one firm said they saw an estimated funded ratio that was the highest they had ever seen. 

Funded Status

“In like a lion, out like a lamb” is supposed to characterize March. But this year was all lamb for the private-sector DB plans some analysts track. 

That certainly applied to funded status and funding ratios. Wilshire reports that the aggregate funded ratio for U.S. corporate pension plans improved by 1 percentage point in March. 

The improvement in the funded ratio that Milliman reports for the 100 largest U.S. corporate pension plans in March was more modest—an increase of 0.3 percentage points to 105.6%. Still, they say, even though the increase in the month was small, the funded ratio by month’s end was the highest they had seen since October 2022. 

In dollars and cents, for Milliman the March results translate to a $5 billion improvement in funded status to $73 billion. 

The funded ratio was highest by Insight Investment’s reckoning. That of the model plan they monitor grew by a modest 0.5% percentage points, but still stood at 112.2% by March 31.

Why? 

“March's increase in funded status was driven by the continued increase in asset value with most asset classes posting positive monthly performances,” Ned McGuire, Managing Director at Wilshire, explained in a press release. Insight investment, too, said that growth in assets was why they reported gains in funded ratios. 

Assets 

Milliman says that the value of the assets of the 100 largest U.S. corporate pension plans improved by $19 billion in March, and hit almost $1.4 trillion by the 31st. Wilshire says that the value of the assets in the plans it tracks grew by 1.7 percentage points in March. Insight Investment showed higher asset growth at 2.3%.

Liabilities

Pension liabilities of the 100 largest plans, reports Milliman, grew by $14 billion in March and reached around $1.3 trillion by month’s end. Wilshire says that the liabilities it tracks grew by just 0.8 percentage points. 

Defined Benefit Warming

Blizzards and cold snaps aside, the first quarter was a warm one, at least as far as private-sector pension plans are concerned. 

Milliman reports that for the quarter, the funded ratio for the 100 largest U.S. corporate pension plans improved by 3.4 percentage points, rising from 102.2% to 105.6%. They add that those plans’ assets rose by $6 billion and liabilities fell by $38 billion. Wilshire makes a similar report, announcing that the aggregate funded ratio for U.S. corporate pension plans improved by 5.1 percentage points in the first quarter.

And the warming is a longer-term trend than that. Wilshire says that by March 31 the funded ratio it measures had improved by 9.7 percentage points from where it was a year before. 

“With the second consecutive month, and quarter, of positive asset returns, U.S. corporate pension plans have continued their 15-month streak of overfunding with the estimated funded ratio at its highest month-end level in several decades,” said McGuire of the longer-term trend. 

Milliman, too, says that for the 12-month period ending March 31, 2024, the funded ratio they measure rose 5.5 percentage points, and the funded status surplus grew by $72 billion.