Prism, a Quarterly Review of Funded Status: Second Quarter 2010 Pension Plan Experience

Abstract

Prism examines the effect of changes in the assets and liabilities of a model defined benefit plan on its funded ratio over the four most recent quarters, viewing such changes through a marked-to-market lens. This issue demonstrates that the combined effect of negative investment experience during the second quarter of 2010 and lower interest rates (causing liabilities to increase) resulted in a dramatic decrease in its funded ratio from 88 percent to 76 percent.

Plan sponsors should examine quarterly changes in their own DB plans' assets, liabilities and funded ratios both from the vantage point of accounting and funding metrics.

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