Corporate Defined Benefit Plans Increase Funding Status

After consecutive months of stagnant or dipping corporate pension asset levels, slight rises in interest rates proved to bring up the funding status of the typical U.S. corporate pension plan in June.

According to reports from asset manager BNY Mellon Investment Strategy & Solutions Group (ISSG) and Wilshire Consulting, the institutional investment advisory business unit of Wilshire Associates, corporate pension assets are now seeing better days thanks to the quick turnaround in interest rates.

Last month, BNY Mellon stated that the funded status has increased 1.4 percentage points to 92% for the corporate defined benefit coffer. And Wilshire Consulting stated there was 0.9% increase for the U.S. corporate pension plan’s aggregate funded ratio to 87.1%.

“June ended a string of three consecutive months of falling rates, which had been driving liabilities higher,” explained Andrew Wozniak, head of fiduciary solutions at ISSG.

Meanwhile, Jeff Leonard, managing director at Wilshire Associates and head of the actuarial services group of Wilshire Consulting, stated that positive returns for most asset classes may have also helped, on top of the liability value decrease due to attractive yields.

Previously, in May, IMMP reported that the estimated aggregate funding level for pension plans sponsored by S&P 1500 companies were stagnant at 84% as positive equity returns were offset by the growth in plan liabilities, according to Mercer.

But, ISSG and Wilshire Consulting listed May's volatility proved to hurt some corporate plans; BNY Mellon said the funded status for the typical corporate pension fell 0.4% to 90.6%, and Wilshire Consulting stated that the aggregate funded ratio dipped by 15 basis points to 85.8%.

And in April, corporate pension asset levels showed similar slides. At the time, Mercer indicated that modest equity market gains weren’t enough to offset the growth in pension liabilities among S&P 1500 defined benefit plan sponsors. As a result, funding levels for pension plans fell 1% during the month to 84%, Mercer said previously.

Source: Mandate Pipeline