Tuesday, December 09, 2014NEW YORK -- The funded status of the typical U.S. corporate pension plan increased 0.4 percentage points to 89.9% in November as assets rose faster than liabilities, reports the BNY Mellon Institutional Scorecard from the BNY Mellon Investment Strategy and Solutions Group.
Public defined benefit plans, endowments and foundations beat their targets in November on the strength of rising asset values.
Assets in the typical corporate plan increased 1.5%, outpacing the 1.1% increase in liabilities. Its funded status is down 5.3% from the December 2013 high of 95.2%.
The BNY Mellon Group attributed the higher assets for corporate and public plans in November to the improvement in U.S. large cap and international developed market equities, while endowments and foundations benefited from the performance of private equity and real estate investment trusts.
The higher liabilities for corporate plans in November resulted from the Aa corporate discount rate falling six basis points to 4.14% over the month. Plan liabilities are calculated using the yields of long-term investment grade bonds. Lower yields on these bonds result in higher liabilities.
"The rebound in funded status in November reversed the damage done in October," said Andrew D. Wozniak, head of fiduciary solutions, in a prepared statement. "However, plan sponsors are bracing for changes in the way regulators view mortality assumptions used to value liabilities. These changes are likely to drive down the funded status for sponsors who will report earnings as of Dec. 31."
Public defined benefit plans in November beat their targets by 0.7% as assets rose 1.3%. Year over year, public plans have underperformed their return target by 0.7%, ISSG.
For endowments and foundations, the real return in November was 0.6% as assets returned 1%. Year over year, endowments and foundations are behind their inflation plus spending target by 0.5%.
Published by The Business Journal, Youngstown, Ohio.
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