Pension Surplus Risk Index (PSRX)
The chart below shows the history of the average funded status of constituent plans included in the PSRX.
In addition to the primary index, NISA provides a matrix of risk estimates for various combinations of risk asset allocations, liability durations and funded status levels, to allow individual plans to determine a volatility level that more closely corresponds to their circumstances. These sector indices assume hypothetical plans with static funded status, liability durations and risk asset allocations over time, for example, 85% funded, 12.5 duration and a 60% allocation to risk assets.
Please refer to the Sector Indices section for more information.
The PSRX reflects the average of the individual funded status volatilities for the index-constituent plans. Constituent plans are:
- U.S. defined benefit corporate pension plans;
- Publicly-traded; and
- The 100 largest plans based on pension liability present value (PBO), as determined by NISA from publicly available documents, and re-constituted annually.
The constituent plans represent approximately $1.48 trillion in assets and $1.52 trillion in liabilities in aggregate as of 12/31/21.
Deriving individual plan volatilities involves three main components:
- Plan-specific asset allocation and liability data, derived from publicly available sources;
- Implied volatilities for various markets from traded options; and
- Correlations between the various asset classes and liability components from historical data.
These three components provide the necessary inputs for a traditional portfolio volatility calculation; in this case the “portfolio” is the combination of both the assets and liabilities of the plan.
In addition to the primary index, NISA provides a table of the risk levels of the major industry sectors, or sector indices. The methodology for calculating the sector indices is identical to the PSRX, but narrowed to only include constituents in the given sector.
Additional PSRX Data
The asset portfolio and the liability volatility are key determinants of the PSRX. The relative level of those components has varied considerably since inception.
The PSRX asset allocation changes annually based on data provided in firms’ 10-Ks. The chart below shows allocations for the 2022 plan year as determined by NISA.
2 Based on common simplifying assumptions, including normal distributions, approximately zero expected surplus return, etc. Please see PSRX Guide for more detailed descriptions.
3 The levels for the PSRX, sector indices and Pension Risk Calculator include data for periods prior to when the index was in live production. Historical levels for the index prior to live production in September 2012 are calculated using the same methodology. Past market experience is not necessarily indicative of future market experience.
Note: The levels for the PSRX, sector indices, and Pension Risk Calculator include data for periods prior to when the index was in live production. Historical levels for the index prior to live production in September 2012 are calculated using the same methodology. Past market experience is not necessarily indicative of future market experience.
All PSRX data as of 08/31/2023.