Pension Funding Rebounds from Record Low

The funded status of the typical U.S. corporate pension plan in August rose 1.8 percentage points to 73.2%–up from July’s record lows, BNY Mellon found.

In August, the Aa corporate discount rate increased eight basis points to 3.72%, sending liabilities for the typical plan 0.9% lower, the BNY Mellon Pension Summary Report for August 2012 indicates. The funded status also was helped by rising equities in the U.S. and international developed markets, which boosted assets by 1.5% in the typical plan.   

“Plan sponsors saw some relief from the extraordinarily low interest rates as the benchmark rate for liabilities increased slightly,” said Jeffrey B. Saef, managing director, BNY Mellon Asset Management, and head of the BNY Mellon Investment Strategy and Solutions Group. “The low interest rates have been the main reason for the 2.1 percentage point decline in funded status year-to-date despite respectable returns in the equities markets.”