Pension Fitness Stays Firm

Model pension plan shows liability-driven asset allocations improved funded status in Q2/2014.

Released yesterday, the Pension Fiscal Fitness Monitor indicates that pension plans’ funded status didn’t change much in the second quarter of 2014. The measure is produced by Legal & General Investment Management America, Inc. (LGIMA) on a quarterly basis to help estimate the health of U.S. defined-benefit pension plans. It determines the change in funded status for a model plan that has typical liabilities and an investment strategy which places 60 percent of assets in global equities and 40 percent in global bonds.

For the traditional 60/40 model plan, funded status fell last quarter by less than half a percentage point; it remains just under 90 percent. With Treasury rates declining 22 basis points and credit spreads tightening slightly, overall liabilities for the model plan increased by just over 4 percentage points, while asset values increased 4 percent.

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