(MEP) U.S. Corporate Pensions Slide in January

Corporate plan sponsors have little to be thankful for in January as their pension plans' total assets and overall funding statuses dipped, according to research compiled by BNY Mellon and Mercer.

Last month, BNY Mellon Investment Strategy & Solutions Group found that funded status for the typical plan dipped 4.2 percentage points to 91%. The Marsh & McLennan company adds in its own analysis that plan sponsors for the S&P 1500 companies saw six percentage point declined to 89%.

Both point to lower yields on corporate bonds as impacting January’s slide. BNY Mellon says that the Aa corporate discount rate experienced a 27 basis-point cut and Mercer lists that the Mercer Yield Curve discount rate saw a 35 basis-points decline.

Mercer adds that the S&P 500 index fell over 3% during the month, which added to pension funding beating. Also, the stock market’s Feb. 3 drop is estimated to “have shaved nearly 2% more off of the funded status,” the firm said

“This was a rough start to the year for plan sponsors,” says Jonathan Barry, a partner in Mercer’s retirement business. The global consulting leader lists that the collective deficit for these plans increased to $232 billion, up $129 billion since the end of December 2013.

Andrew Wozniak, director of portfolio management and investment strategy at BNY Mellon’s ISSG, adds that “January’s decline was the largest monthly drop in funded status for U.S. corporate plans since May 2012.”

BNY Mellon’s calculations find that corporate assets fell 0.4% and liabilities increased 4.2%.

Previously, IMMP reported in early January that U.S. public companies saw their pension plans rally to 95.2% funded status at the end of 2013. At the time, competing studies highlighted that pension plan funded gaps saw extreme improvements, which proved to lift up overall funding status levels.

Source: Mandate Pipeline