The Markets March 5, 2014

Corporate Pension Funding Rises to 92.6%

The funded status of the typical U.S. corporate pension plan improved 1.7% in February to reach 92.6%, as most asset classes gained during the month.
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The BNY Mellon Investment Strategy & Solutions Group (ISSG) notes that for February the gains in asset values outpaced the rise in liabilities, which resulted from falling interest rates. Year to date, the funded status of the corporate plans is down 2.6%, according to ISSG’s Institutional Scorecard.

”The financial status of pensions, endowments and foundations in February recovered a significant amount of the ground they lost in January, as most asset classes recovered,” says Andrew D. Wozniak, director of portfolio management and investment strategy for ISSG, based in New York. “Concerns about global growth fundamentals that had surfaced in January appeared to abate somewhat in February.  Commodities were the best performing asset class in February, rising 6.24%.”

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For U.S. corporate plans, assets increased 3.3% and liabilities increased 1.4% during the month, according to ISSG. The increase in liabilities in February was due to an eight-basis-point decline in the Aa corporate discount rate to 4.58%. Plan liabilities are calculated using the yields of long-term investment grade bonds. Lower yields on these bonds result in higher liabilities.

For endowments and foundations, the real return for the month was 3%, which exceeded the target for spending plus inflation, says ISSG. Investments in commodities and real estate helped endowments and foundations to strong performance in February.

Mellon Capital Management, BNY Mellon’s San Francisco-based multi-asset manager, attributed the spike in commodities to unusual weather conditions in the U.S. and abroad, setting off concerns about potential grain shortages.

“We do not view the rise in commodities as a signal of future excessive inflation,” says Suzanne Ly, vice president, asset allocation portfolio management, Mellon Capital. “The strength in the commodity markets should abate as the weather normalizes and inflationary pressures remain low.”

Wozniak concludes that plan sponsors continue to show interest in strategies to hedge their portfolios against market volatility. “Many sponsors view the continuing financial strength of corporate pensions as an opportunity to lower the risks they face,” he says.

Deals & People March 5, 2014

Blue Ridge Names Director of Plan Admin.

Blue Ridge ESOP Associates has named Kevin T. Rusch as the firm's director of plan administration.
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Rusch is a certified public accountant and qualified pension administrator, the firm says. He has worked in the retirement industry since 1995 and has a background in employee stock ownership plans (ESOPs), as well as 401(k) administration and consulting services. His office will be located in Menasha, Wisconsin.

Rusch will provide ESOP design and consulting services, plan administration support and compliance services. His experience is intended to enhance the full range of ESOP-related services Blue Ridge offers to clients, the firm says.

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Rusch is a member of The ESOP Association’s Administration Advisory Committee and is a frequent speaker on ESOP administration topics for both The ESOP Association and the National Center for Employee Ownership. He has also served as an ESOP subject matter expert for the American Society of Pension Professionals & Actuaries (ASPPA) Education and Examinations Committee.

Blue Ridge ESOP Associates provides third-party administration and consulting services for employee stock ownership plans and 401(k) plans sponsored by companies across the United States.

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