The Pension Plan Underfunding Dilemma: Analyzing The Trends

White Papers

The funding status of corporate defined benefit (DB) pension plans remains a subject of concern for many company officers and is not going away soon. Surprises requiring unexpected (and sometimes sizeable) contributions to pension plans can have a significant impact on a company’s financial position. In this paper, Conning shares a data-driven understanding of corporate pension plans. The authors create a profile of an “average” DB plan and observe how assets, asset allocation, liabilities and funded status have evolved. The data indicate that companies on average are currently in a holding pattern: plan assets may be increasing as assets markets improve, but liabilities are rising as well due to low interest rates. Companies hoping for improvement in plan funding status may have to take more active measures, as it will likely require more contributions and a greater refining of investment strategies to generate meaningful improvements.

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