The funded status of the model pension plan examined each quarter by The Segal Group rose 5 percentage points to 98 percent in the fourth quarter of 2013, thanks to asset increases.
The model pension plan’s funded status is a dramatic improvement from its 77 percent funded status at the end of 2012.
The consulting firm examines the effect of changes in the assets and liabilities of a model pension plan on its funded ratio over the most recent quarters to better understand the combined impact of asset movement and interest rate shifts on a plan’s funded status.
According to The Segal Group, which is made up of Sibson Consulting and Segal Rogerscasey, domestic equities ended the year with a 10 percent gain, outperforming international equities, which experienced 5 percent growth. Small-capitalization stocks underperformed large-capitalization stocks, while growth stocks outperformed value, the report found.
Emerging markets underperformed developed markets within international equities for the fourth consecutive quarter and global bonds posted a 1.09 percent loss for the quarter. Developed market equities experienced a very strong fourth quarter and 2013.
The Segal Group found that global macro conditions are improving, global stocks appear to be cheap relative to bonds and monetary policy conditions remain accommodative.
During the fourth quarter, assets in the model plan rose 5 percent and liabilities dropped by 1 percent. The model plan’s portfolio includes 45 percent in domestic equities, 15 percent in international equities and 40 percent in global bonds.
The liabilities dropped as a result of an increase in the effective interest rate.