January 06, 2015

Funded Status of U.S. Corporate Pensions Falls to 87.3 Percent, According to BNY Mellon ISSG

Corporate Plans, Public Plans, Foundations and Endowments All Finish Year on Weak Note

NEW YORK, Jan. 6, 2015 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan fell 2.6 percentage points to 87.3 percent in December as assets fell and liabilities increased, according to the BNY Mellon Investment Strategy and Solutions Group (ISSG).  

Public defined benefit plans, endowments and foundations also lost ground during the month, ISSG said.

For the typical corporate plan in December, assets decreased 0.4 percent as liabilities increased 2.5, according to the BNY Mellon Institutional Scorecard.

The funded status for the typical corporate plan finished 2014 down 7.9 percent from the December 2013 high of 95.2 percent, according to the scorecard.

Falling international and emerging markets equities accounted for the decline in assets at U.S. corporate plans and public plans, while the declines in private equity and commodities led to negative returns for foundations and endowments, ISSG said.

The higher liabilities for corporate plans in December resulted from the Aa corporate discount rate falling 14 basis points to 4.00 percent over the month.  Plan liabilities are calculated using the yields of long-term investment grade bonds.  Lower yields on these bonds result in higher liabilities. 

"The decline in interest rates, with the Aa corporate discount rate falling 93 basis points during the year, was the main driver for the fall in funded status during 2014," said Andrew D. Wozniak, head of fiduciary solutions, ISSG. "Asset gains simply could not keep up with the rise in liabilities.  The falling rates of 2014 erased almost all of the gains in funded status in 2013 that resulted from rising interest rates during that year."

Public defined benefit plans in December underperformed their targets by 1.8 percent as assets declined 1.2 percent, according to the monthly report.  For the full year of 2014, public plans underperformed their return target by 3.0 percent, ISSG said.

For endowments and foundations, the real return in December was -1.8 percent, as assets declined 1.4 percent, ISSG said.   For the year, endowments and foundations are behind their inflation plus spending target by 2.7 percent, ISSG said.

Notes to Editors:

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 $1.6 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 www.bnymellon.com.

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of Sept. 30, 2014, BNY Mellon had $28.3 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

All information source BNY Mellon as of September 30, 2014. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance. A BNY Mellon Company.   

Mike Dunn
+1 212 922 7859

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