Funded Status of U.S. Corporate Pensions Rises to 90 Percent, According to BNY Mellon ISSG

New York - 4 May 2015

Public Plans, Foundations and Endowments Exceed Targets

The funded status of the typical U.S. corporate pension plan increased 2.9 percentage points in April to 90.1 percent, as rising interest rates sent liabilities lower, according to the BNY Mellon Investment Strategy and Solutions Group (ISSG).  

Public plans, endowments and foundations exceeded their targets for the month, as asset values rose, according to the BNY Mellon Institutional Scorecard.

For the typical U.S. corporate plan, assets in April increased 0.7 percent; while liabilities fell 2.6 percent as the Aa corporate discount rate rose 20 basis points to 4.06 percent. 

Plan liabilities are calculated using the yields of long-term investment grade bonds.  Higher yields on these bonds result in lower liabilities. 

The funded status is 0.5 percentage points lower than at this time last year and 2.8 percentage points higher than at the beginning of the year.

"Corporate plans are seeing the benefits of a slight rise in interest rates, which have increased for three consecutive months and are pushing down liabilities," said Andrew D. Wozniak, head of fiduciary solutions, ISSG.  "Emerging markets equity and private equity both had strong months, benefiting public plans, endowments and foundations."

Public defined benefit plans in April exceeded their return target by 0.9 percent as assets returned 1.5 percent, according to the monthly report.  Year over year, public plans remain below their return target by 1.8 percent, ISSG said.

For endowments and foundations, the real return in April was 1.2 percent as assets returned 1.5 percent, ISSG said.   Year over year, endowments and foundations are behind their inflation plus spending target by 1.1 percent, ISSG said. 

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