The funded status of Segal Group Inc.’s model multi-employer pension plan increased three per cent in the fourth quarter of 2019, according to a new report by the actuarial firm.
During the quarter, the funded status of the hypothetical plan rose from 92 per cent to 95 per cent. However, this compares to 98 per cent during the first quarter of 2018 and 101 per cent in the third quarter of 2017.
The model MEEP’s portfolio has a passively invested asset allocation of 25 per cent domestic equities, 15 per cent U.S. equities, 15 per cent international equities and 45 per cent Canadian bonds.
The report credited several factors for the increase, including: progress in U.S.-China trade negotiations; the majority win for U.K. Prime Minister Boris Johnson’s Conservative Party, which ensured its departure from the European Union; and the U.S. Federal Reserve cutting interest rates for the third time in 2019.
In addition, the report found an increase in actual hours worked for all industries, though a sharp decline in hours worked in the utilities industry. A drop in the number of hours worked impacts a plan’s ability to cover fixed costs, warned the Segal Group, noting the risk is magnified when a plan is dependent on future contributions to pay its unfunded benefit obligations.