The Markets August 3, 2012

Pensions Have Record-Low Funding Level in July

The funded status of the typical U.S. corporate pension plan reached a record low in July.
Reported by

The funded status fell 2.9 percentage points, to 68.7%, the lowest level since BNY Mellon began tracking this information in December 2007, according to the BNY Mellon Pension Summary Report for July 2012.

The decrease was driven by a sharp spike in liabilities, which increased 5.5%, outpacing a 1.2% gain in assets at the typical corporate plan. The funded status of the typical plan has now fallen 3.7 percentage points during 2012.

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The rise in liabilities resulted from the 34 basis-point drop in the Aa corporate discount rate to 3.64%.  Plan liabilities are calculated using the yields of long-term investment grade bonds.  Lower yields on these bonds result in higher liabilities.

Assets in the typical plan benefited from rising equity markets, including a 1% gain in U.S. equity markets and a 1.1% increase in international developed markets.

“The continuing uncertainty regarding the Eurozone and lack of a coordinated response to the debt issues in Europe continue to send investors into bonds that are perceived to be a safe haven,” said Jeffrey B. Saef, managing director, BNY Mellon Asset Management, and head of the BNY Mellon Investment Strategy and Solutions Group, a BNY Mellon division. “As long this uncertainty remains, we expect to see very low interest rates, which will continue to pressure plan sponsors.”

Saef also noted that portfolios for plan sponsors have performed well, with assets rising more than 7% during the first seven months of the year for the typical U.S. corporate plan. However, he added, “Hitting a return target isn’t enough these days if you’re not keeping up with the growth in liabilities.”

 

Deals & People August 3, 2012

Plaze to Retire After 30 Years at SEC

As deputy director of the Securities and Exchange Commission (SEC) Division of Investment Management, Robert E. Plaze most recently worked on money market funds.
Reported by

Plaze first joined the SEC in 1983 as an attorney in the Division of Investment Management, and has since served as special counsel, assistant director, associate director for regulatory policy and deputy director.

“Few people have had as great an impact shaping the regulatory landscape for the benefit of individual investors,” said SEC Chairman Mary L. Schapiro. “Bob’s keen intellect and passion for investor protection have been central to virtually every significant rule affecting mutual funds and investment advisers for more than a generation.”

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Norm Champ, director of the Division of Investment Management, added: “Bob has been instrumental in the creation of the regulatory regime for investment advisers and investment companies. He has had a long and distinguished career working on behalf of investors.”

Plaze has worked on rulemaking for money market funds and on implementing a Dodd-Frank Act requirement for hedge funds, as well as on numerous mutual fund governance practices—including fee tables in mutual fund prospectuses, standardized fund performance in advertisements, the adoption of compliance programs at fund investment advisers, and protecting pension plans and other investors from “pay-to-play” practices.

Plaze also was given the SEC’s Distinguished Services Award and, twice, the agency’s Law Policy Award. He is a graduate of Georgetown University and Georgetown University Law Center.

Plaze said: “It’s been an honor and privilege to work at the Commission. When I began, I expected to stay a few years, but I found that the issues were so engaging and the work so important that I remained here for nearly three decades.”

                                  

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