New York (11/4/15) — During the third quarter of 2015, the funded status of the model pension plan examined in Sibson Consulting and Segal Rogerscasey’s publication, Prism, decreased by 5 percentage points: from 87 percent to 82 percent. This decrease was the result of a 4 percent asset decrease and a 2 percent liability increase during the quarter, and follows an 8 percent increase in funded status from the second quarter.
“The significant volatility in funded status throughout 2015 highlights the importance of risk mitigation, especially relating to the uncompensated risk of interest-rate movements,” commented Stewart Lawrence, National Retirement Practice Leader. “As we emphasized last quarter, this financial environment may mark an appropriate time for plan sponsors to consider changes of their plan’s risk-mitigation strategy. However, given the pension provisions of the just-signed Bipartisan Budget Act of 2015, plan sponsors need to be mindful that in mitigating risk in one arena, they are not increasing risk in another.”
Investment performance dropped off this quarter largely due to poor performance by global equities amid concerns over global growth, particularly in China. Meanwhile, a decrease in the yield curve in the third quarter resulted in an increase in the effective interest rate and, consequently, a 2 percent increase in our model pension plan’s liabilities.
To read the issue of Prism, which includes three graphs, please click here.
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Sibson Consulting (www.sibson.com), a member of The Segal Group, provides strategic human resources solutions to corporate and non-profit employers and professional service firms. Sibson's services include benefits, compensation, talent and performance management, communications, sales force effectiveness and change management. In 2014, The Segal Group is celebrating the 75th anniversary of its founding by Martin E. Segal.