$20 Billion Club: It's Been a Minute Since We've Seen Numbers Like This…

We just finished up our annual report on the $20 billion club, and we've concluded that 2022 was a weird year for pension plans. We are accustomed to seeing things move slowly, in fairly predictable ways. There may be blips along the way, but generally trends continue. The year 2022 may have turned the new normal on its head.

Let me share a few examples of things we observed with the 20 sponsors that have the largest global pension liabilities of US-listed companies.

Discount Rates jump above 5%
Last seen: 2010

As the Fed raised rates by 400 bps in 2022, corporate bond rates reacted. While every DB plan was different depending on the yield curve they used and the duration of their liabilities, on average, discount rates for this group increased by 250 bps!

It's getting to the point where accounting discount rates are close to where funding discount rates have been for the last several years. Relatively high rates have been persistent so far in 2023, but this could change quickly.

Click image to enlarge

Bar chart of average discount rates from 2009 to 2022

Source: Corporate 10-k filings, Russell Investments calculations

Investment Return of negative 21%
Last seen: Never?