Sibson and Segal Rogerscasey's Prism: Liability Increases Cause a Drop in Funded Status for First Quarter 2015

NEW YORK--(BUSINESS WIRE)--

During the first quarter of 2015, the funded status of the model pension plan examined in Sibson Consulting and Segal Rogerscasey's e-publication, Prism, decreased by two percentage points: from 81 percent to 79 percent. This was primarily due to a three percent increase in liabilities and flat investment performance.

Retirement Practice Leader Stewart Lawrence noted, "The fourth quarter 2014 funding ratio was reset to incorporate the change by many plan sponsors to their mortality assumption, reflecting improved longevity and, consequently, increased liabilities. This significant drop in the funded status caused by the new mortality standard raises the question of whether there is merit in re-examining and validating previously-made decisions in de-risking, investment policy or funding policy."

The flat investment performance during the quarter was a result of another decline in the global fixed-income market. Both domestic and international equities started the year on a solid note, posting gains of 1.80 percent and 3.49 percent, respectively.

Mr. Lawrence added, "Because individual plan results will differ from this model for many reasons, plan sponsors should examine changes in their own defined benefit plans' assets, liabilities and funded ratios from the vantage point of both accounting and funding metrics."

To read the full issue of Prism, please click here.