September 06, 2012

August Rebound Takes Funded Status of U.S. Corporate Pensions off Record Low Level, According to BNY Mellon

Typical Plan Rises to 73.2 Percent as Liabilities Fall, Assets Rise

NEW YORK, September 6, 2012 — The funded status of the typical U.S. corporate pension plan in August increased 1.8 percentage points to 73.2 percent on a slight rise in both interest rates and asset values, taking the typical plan off the record low levels of July, according to BNY Mellon.

In August, the Aa corporate discount rate rose eight basis points to 3.72 percent, sending liabilities for the typical plan 0.9 percent lower, according to the BNY Mellon Pension Summary Report for August 2012.  Plan liabilities are calculated using the yields of long-term investment grade bonds.  Higher yields on these bonds result in lower liabilities.

The funded status also was helped by rising equities in the U.S. and international developed markets, which boosted assets by 1.5 percent in the typical plan, according to the August report.

"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."

The BNY Mellon Investment Strategy and Solutions Group is a division of The Bank of New York Mellon.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.3 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at

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