Corporate defined benefit plans shifting toward fixed income

The funded status of corporate pension funds continues to increase, with the average at 96.3% as of May 31 vs. 83.8% a year ago, according to NISA Investment Advisors. Based on the trend, Bank of America expects corporate pension funds to shift assets into fixed income, accelerating an ongoing movement. At the end of 2020, the median fixed-income allocation of the 100 largest corporate pension funds was 44.7%, ranging from Delta Air Lines at 12% to Goodyear Tire & Rubber at more than 91%. In 2015, the median allocation was 35.1%, with Delta and Goodyear representing the lowest and highest at about 11% and 89%, respectively.

There were 80 companies on Pensions & Investments largest corporate defined benefit plan list in 2015 and 2020. Out of these, 62 raised their allocations to fixed income — many significantly. For instance, J.P. Morgan Chase had over 72% of its pension fund assets in fixed income in the most recent year compared to about 23% five years ago.