(MEP) U.S. Corporate Pension Funded Status Hits 95.2% in 2013

The collective funded status of pension plans administered for U.S. public companies experienced a rally to 95.2% when 2012 ended, according to studies issued by Milliman and BNY Mellon.

Competing studies released Tuesday highlight that pension plan funded gaps saw extreme improvements, which proved to lift up each group’s overall funding status.

According to global consulting and actuarial firm Milliman, the latest round of its Pension Funding Index report, a tracking of 100 of the nation’s largest defined benefit pension plans, noted in the Jan. 7 announcement that this group simultaneously increased their assets by $10 billion and reduced their pension liabilities by $10 billion when the calendar year ended last month.

“This was the first win-win year for pensions since 2007, with assets improving by $128 billion and liabilities decreasing by $190 billion,” said John Ehrhardt, co-author of the Milliman Pension Funding Index. “Just to put this rally in perspective: These pensions saw a $337 billion decrease in funded status in 2008, and in the past year we saw a $318 billion improvement.”

The BNY Mellon Investment Strategy & Solutions Group (ISSG) mirrored the same funded level for its analysis of the typical U.S. corporate pension plan for December 2013. Corporate plans increased their assets by 0.8% and liabilities dipped by 0.6%. Adding to these improvements was the eight bps increase in the Aa corporate discount rate to 4.93%

“December capped off a strong year as the funded status of the typical U.S. corporate plan increased more than 18 percentage points in 2013,” said Jeffrey Saef, managing director, BNY Mellon, and head of ISSG. “It was the best of all worlds as rising equities benefited the asset side, while the rising discount rate resulted in lower liabilities. These trends have encouraged a growing number of plan sponsors to reduce their exposure to market volatility.”

Last week, professional services company Towers Watson and UBS Global Asset Management, the asset management arm for the Switzerland-based bank, noted Jan. 2 that corporate plans continued to grow their funding ratios past 90% last month. The high funded ratio level reaffirms findings released by Mercer, a Marsh & McLennan company.

According to Towers Watson, results for pension plan data for the 418 Fortune 1000 companies indicate that the aggregate pension funded status is estimated at 93%. And UBS Global Asset Management’s U.S. Pension Fund Fitness Tracker highlighted that point to a 95% funded ratio for the typical corporate pension plan in the nation.

Also, Mercer said Jan. 2 that the 95% funding ratio increased by 2% from November and is up 21% since the year began.

Source: Mandatepipeline.com