The NISA Pension Surplus Risk index rose 0.4 percentage points in June to 7.5%, while the average plan funded status rose to 84.4% from 83.8% in May. The volatility of the asset component rose a modest 0.2 percentage points, remaining at its highest level since the taper tantrum, the panic that triggered a spike in U.S. Treasury yields during several months in 2013. On the other side of the equation, the liability component of the index fell as yield spreads continued to tighten.
June marked the second consecutive month of improvement for the average funded status as the equity rebound and tightening spreads have outpaced discount rate declines. Equities were higher in June as the S&P 500 index rose 1.8% and the MSCI ACWI index added about 3%, but July has shown signs of weakness. Cases of COVID-19 have spiked as summer weather has drawn people out of quarantine and into large gatherings creating significant concern that the economic slowdown will continue.
The Pension Surplus Risk index, or PSRX, is a forward-looking estimate of the funded status volatility of U.S. corporate defined benefit pension plans. The index level represents a one standard deviation change in funded status over a one-year horizon, based on the average of the 100 largest pension plans. As of Dec. 31, the plan liabilities of the constituent base totaled $1.3 trillion, with $1.5 trillion in total plan assets.