Rising interest rates so far in 2021 have pushed the aggregate funded status of US corporate defined benefit (DB) pension plans to its highest level since the 2008 global financial crisis. This comes after funded status barely changed in 2020, when lower rates offset strong asset gains.
We think this improvement in funded status may present plans with opportunities to de-risk. In the past, plan sponsors haven’t always used favorable market moves to better align assets with liabilities. In our 19th annual pension review, “First Take”: Here We Go Again…and Again, we highlight actions plan sponsors may wish to consider this time around, and offer observations on the status of the US corporate DB system.
Plan sponsors may want to consider de-risking their portfolios after recent market moves improved overall funded status.
Each year, we perform a comprehensive review of the DB pension plans of every company in the S&P 500 index based on the information they file in their annual 10-K reports with the Securities and Exchange Commission. As in previous years, we have focused our initial analysis in our “First Take” report on the 50 companies in the S&P 500 with the largest US DB plans based on asset values. The goal of this “First Take” review is designed to provide initial impressions on the issues and factors impacting corporate DB plan sponsors.
GS Asset Management's Mike Moran explains how pension plans have fared in 2020.