The funded status of the average U.S. corporate pension plan increased by
only 0.1 percentage point to 79.2 percent in July, according to an analysis by
BNY Mellon Asset Management.
Assets and liabilities both rose 5.4 percent during the month.
“July’s stock market euphoria has not translated into pension funded status
gains,” Peter Austin, executive director of BNY Mellon Pension Services, the
pension services arm of BNY Mellon Asset Management, said in a news release.
“While U.S. stocks returned nearly 8 percent and international stocks were up
more than 9 percent in July, these big gains were only enough to offset the rise
in liabilities that plans face. This rise in liabilities was due to the decline
in the discount rate on AA corporate bonds to 5.88 percent from 6.28 percent at
the end of June.”
Pension plan managers now must decide whether to position their portfolios
for gains in equity markets or take a defensive position against the increase in
liabilities, Austin said in the release.
“A majority of corporate pension plans continue to be underfunded,” Austin
said in the release. “A continuing equity rally would lower the contributions
that companies would need to make to their pension plans to achieve full
funding. However, declining stock markets or a further drop in bond yields would
put increasing pressure on the plans.”
Filed by Timothy Inklebarger of Pensions
& Investments, a sister publication of Workforce Management To comment,
e-mail editors@workforce.com.
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