The Markets March 2, 2012

Pension Plan Funded Status Rises in February

The typical U.S. corporate pension plan’s funded status rose 2.1% in February. 
Reported by

According to BNY Mellon Asset Management, this is the fifth consecutive month that rallying equities helped to drive the pension funded status. The status at the end of February was 76.2%.

Pension plans also benefited from a slight rise in interest rates, which resulted in lower liabilities, according to the BNY Mellon Pension Summary Report for February 2012.

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The funded status of the typical corporate plan has increased 3.8 percentage points this year.

Assets for the typical plan in February rose 2.7%, as liabilities decreased 0.2%, BNY Mellon said. The decline in liabilities was due to a three basis point increase in the Aa corporate discount rate to 4.33%.

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

“The equity markets have provided some relief to corporate pension plans for the last five months and we now are at our best funding levels since August 2011,” said Jeffrey B. Saef, managing director, BNY Mellon Asset Management, and head of the BNY Mellon Investment Strategy & Solutions Group (a division of The Bank of New York Mellon). “Corporate plans will need the rally in stocks to continue, a bump in interest rates, or a combination of these drivers to further close their funding gaps.”  

The Markets March 1, 2012

Now Is the Time to Push Retirement Savings Message

It is a good time for retirement plan sponsors to take stock of the long-term benefits of retirement programs, and get that message out to participants.
Reported by

Patricia Advaney, senior vice president, Participant Solutions, Diversified, notes that the stock market is moving toward significant milestones since the recession of 2008, the unemployment picture is better, consumer confidence is up and defined contribution plan participants are seeing their account balances buoyed up after 2008 and 2009 declines. With the general feeling that the economy is rebounding, plan participants are now psychologically more receptive to the retirement savings message, she contends.  

When the economy declined, not only did some participants pull back on their retirement savings, but some plan sponsors were reluctant to initiate auto enrollment or auto escalation plan features, or they held down default deferral rates for auto enrollment, Advaney told PLANADVISER. With the economy improving, it is a good time to remind participants of the long-term success of their retirement plans, and to remind sponsors of the benefits to employees of automatic enrollment or automatic deferral escalation plan features.  

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Advaney says Diversified’s research shows participants are open to automatic escalation; 78% indicated they want an easy way to increase savings each year.  

One thing Diversified is doing is pushing out messages to low savers giving them information about what people like them are saving, i.e. averages for their plan, their age group, etc.  The messages encourage those saving below average rates to increase savings to at least the average.   

Sponsors shouldn’t shy away from those types of messages anymore, and they can team up with plan advisers and providers to get messages out to participants.  

“Those influenced by doom and gloom in the economy, we want to appeal to those folks to tell them it’s not bad anymore, it’s OK to save and invest, it’s for the long-term,” Advaney says. 

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