Assets Hold Ground Against Liabilities
BOSTON, July 13, 2011 — The funded status of the typical U.S. corporate pension plan in June increased 0.8 percentage points to 88.5 percent as assets fell less than liabilities, according to monthly statistics published by BNY Mellon Asset Management.
Liabilities for the typical plan fell 2.1 percent as the Aa corporate discount rate increased 19 basis points to 5.53 percent from 5.34 percent, according to the BNY Mellon Pension Summary Report for June 2011. Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Higher yields on these bonds result in lower liabilities.
Assets for the typical plan fell 1.1 percent, reflecting declines in U.S. and global equities, the report notes.
"The June results reversed some of the losses that pension funds sustained in May," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. "However, the volatility in equity returns in recent months reflects the fragility of the global markets. The risk of further deterioration in asset values complicates the decision-making of plan sponsors."
Austin noted that one course for plan sponsors would be to lock in the improvements in pension funding that have been achieved since the funded status reached a nadir in August 2010. He said the other choice would be to maintain a more aggressive asset allocation posture in an effort to improve the funded status of their plans through asset returns.
The statistics for the first six months of 2011 were adjusted to reflect updated information obtained from Standard & Poor's® regarding the funded status of the companies comprising the S&P 500 Index. BNY Mellon typically does its annual revision of these statistics every June.
"Standard & Poor's 500®" is a trademark of McGraw-Hill, Inc and has been licensed for use by BNY Mellon (together with its affiliates and subsidiaries). The provider of this index is not affiliated with BNY Mellon; does not endorse, sponsor, sell or promote the investment strategy mentioned herein; and makes no representation regarding the advisability of investing in the strategy described herein.
BNY Mellon Asset Management is one of the world's leading asset management organizations, encompassing BNY Mellon's affiliated investment management firms and global distribution companies. Information about BNY Mellon Asset Management can be found at www.bnymellonam.com.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $25.5 trillion in assets under custody and administration and $1.2 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available at www.bnymellon.com.