Corporate Pension Funding Status Rose in December, Ending Strong in 2024

Pension plans saw improved funding status at the end of 2024, with rising discount rates triggering a decrease in pension liabilities. 

2024 marked another strong year for U.S. corporate pension funded status, driven by a net increase in discount rates driving falling pension liabilities, according to analyst firms.  

Milliman found that U.S. corporate pension plans saw a funded status improvement of $68 billion for the year—a stark contrast to the $31 billion funded status loss experienced in 2023. Aggregate funded status was at 100% for 2024, the first time in 17 years that pension plans closed the year at fully funded or better, according to WTW.   

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Overall, the year-end 2024 funded ratio rose to 105% from 99.5% at the end of 2023, according to Milliman. Plan liabilities decreased by about $94 billion due to an increase in discount rates of 59 basis points. 

Milliman also found that the fourth quarter of 2024 saw the largest funding improvement of the year.  

Wilshire estimated that the aggregate funded ratio for corporate pension plans increased by about 0.9 percentage points in December, ending the month at 104.1%, an 8.3-percentage-point increase from December 2023. Wilshire attributed the change in December’s funded ratio to a 4.4-percentage-point decrease in liability value, partially offset by a 3.5-percentage-point decrease in asset value. 

“December’s increase in funded status was driven by a decrease in liability value, resulting from a more than 30 basis point increase in corporate bond yields, the largest increase since April 2024 despite the over 3% decline in broad U.S. equity indices,” stated Ned McGuire, managing director at Wilshire. “During the calendar year 2024, the FT Wilshire 5000 Index reached several all-time highs and posted an over 20% return for the second consecutive year. This marks the best two-year gain of the century and has propelled the month-end aggregate funded ratio estimate above 100%.” 

WTW only saw a modest increase in funded status in 2024, despite strong U.S. equity market gains and rising long-term interest rates. The firm found that the aggregated funded status for 361 Fortune 1000 companies that sponsor U.S. pension plans was estimated to be 100%, just two percentage points higher than 98% at the end of 2023.  

WTW reported that pension obligations declined to $1.12 trillion from $1.25 trillion at the end of 2023 due to higher interest rates and pension risk transfer activity.  

“Strong gains in the stock market and rising interest rates would traditionally have helped to strengthen the overall financial health of corporate pension plans,” stated Joseph Gamzon, a managing director of retirement at WTW. “However, pension plan assets are less concentrated on equity investments today, as they hold more bonds to support liability-hedging strategies to provide funded status stability. As a result, many plan sponsors were able to achieve their goals of funded status stability while also seeing moderate increases in pension plan funding during 2024.” 

Moving into 2025, Fred Lamm, also a managing director of retirement at WTW, said in a statement that sponsors whose plans are not fully funded should keep an eye out for opportunities to manage costs and cash contributions, including investment strategy and de-risking initiatives. Those with well-funded plans, on the other hand, will want to protect their assets and use the surplus for employee benefits in the coming year, Lamm said. 

Data from MetLife Retirement and Income Solutions, published last week, reported that 90% of plan sponsors are considering a pension risk transfer to an insurance company of their defined benefit plans, with 80% of that group likely to act on a PRT within the next five years. The firm’s research also found that economic conditions—including rising interest rates, rising inflation and increased market volatility—are among the forces driving increased pension risk transfer activity in the U.S. 

Agilis similarly found that 2024 was a good year for pension funded status, with discount rates up about 0.70% from the end of 2023, pushing liabilities lower. As more pension sponsors have shifted to liability-driven investment strategies, Agilis reported that the typical pension plan saw modest improvements in 2024, with those more heavily invested in equities seeing even bigger improvements. 

Liabilities shrank more than pension assets in December 2024, which Agilis attributed to the potential for the Federal Reserve to keep interest rates higher for longer than previously expected. 

LGIM America estimated that pension funding ratios were relatively unchanged throughout December. Based on market movements, LGIM found that the average funding ratio stayed constant at 111%. According to LGIM, plan assets with a traditional “50/50” stock-to-bond asset allocation decreased 3.6% while liabilities decreased 3.3%, resulting in little movement to funded ratios by December month-end.  

October Three saw mixed results for both model plans it tracks, but it saw positive overall funded status for the year. The traditional Plan A, which has a 60/40 asset allocation, improved less than 1% last month, ending the year up 11%. The more conservative Plan B, with a 20/80 allocation, lost a fraction of 1% in December, ending 2024 up two percentage points for the year.  

October Three expects most pension sponsors to use effective discount rates in the 5.3% to 6.6% range to measure pension liabilities on their balance sheets at the start of 2025. Current rates are the highest year-end rates seen in 15 years, according to the firm.  

Advisory M&A News – 1/13/24

Mariner acquires Cardinal Investment Advisors; Northwestern Mutual and Sixth Street announce partnership; Mercer Advisors adds Edward Vance Investment Management; and more.

Mariner Acquires Cardinal Investment Advisors

Mariner Wealth Advisors LLC announced the acquisition of Cardinal Investment Advisors in a deal that adds $292 billion in assets under advisement and about 40 employees to the Mariner Institutional practice. The acquisition will bring Mariner’s total assets under advisement to approximately $550 billion.

Cardinal Investment Advisors, with offices in Chicago and St. Louis, has delivered investment consulting services since 2001 and will become the insurance advisory practice within Mariner Institutional.

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Cardinal’s nationwide client base is focused on insurance companies, as well as corporate retirement plans, health care systems, foundations and endowments.

“This acquisition kickstarts a year that will be filled with growth, innovation, and a relentless pursuit of providing the best client-focused financial services,” Marty Bicknell, Mariner’s CEO and president, said in a statement.

Northwestern Mutual and Sixth Street Announce Partnership

Northwestern Mutual Life Insurance Co. and global investment firm Sixth Street Partners announced a partnership to support Northwestern Mutual’s investment strategy for its institutional investment portfolios, which total more than $320 billion AUM.

Under the partnership, Sixth Street will manage $13 billion of assets for Northwestern Mutual, with the potential to scale. Investments will span Sixth Street’s multi-strategy private capital approach. This includes asset-based finance, as well as investments in real estate, infrastructure debt and equity.

As part of the agreement, Northwestern Mutual will acquire a minority equity interest in Sixth Street.

“This new partnership with Sixth Street significantly expands Northwestern Mutual’s investment capabilities by providing increased access to attractive private investments—all of which complement our internal team,” Jeb Bentley, Northwestern Mutual’s chief investment officer, said in a statement.

Mercer Advisors Adds Edward Vance Investment Management

Mercer Global Advisors Inc., a national registered investment adviser, announced the acquisition of Edward Vance Investment Management, an investment advisory and financial planning firm.

This acquisition strengthens Mercer Advisors’ presence in Georgia, where Mercer Advisors has grown client assets to more than $4.5 billion from approximately $550 million in 2017.

Led by owner Edward Vance, the Georgia-based firm specializes in comprehensive financial planning. The firm offers services such as retirement planning and tax and estate strategies. By joining Mercer Advisors, Vance gains access to expanded resources and the support of a broader team of specialists.

“Leveraging Mercer Advisors’ vast team of specialists, modern technology solutions, and extensive resources will provide me with opportunities to enhance the client experience and do my best work as a financial adviser,” Vance said in a statement.

Wealth Enhancement Announces Acquisition of Danison & Associates Inc.

Wealth Enhancement Group LLC, a national independent wealth management firm with more than $103 billion in client assets, announced the acquisition of Danison & Associates Inc., an independent RIA in Columbus, Ohio.

The Danison team oversees more than $82 million in client assets and is led by Dean Danison, president, and Tracey Danison, vice president.

“We are so pleased that Danison & Associates is joining Wealth Enhancement,” Jeff Dekko, Wealth Enhancement’s CEO, said in a statement. “With access to our centralized planning, estate, tax and trust services, we are confident that the team will continue to thrive and achieve even greater success.”

Danison & Associates was founded in 1997, serving both individuals and small businesses. The acquisition of Danison & Associates closed on December 31, 2024, and marked Wealth Enhancement’s 20th closed transaction of 2024.

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