September 03, 2015

Funded Status of U.S. Corporate Pensions Falls to 84.2 Percent, According to BNY Mellon Fiduciary Solutions

Public Plans, Endowments and Foundations Fare Poorly in Turbulent Month

NEW YORK, Sept. 3, 2015 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan declined in August, dropping by 2.5 percentage points to 84.2 percent. While liabilities fell slightly due to widening credit spreads, the decline was driven by a larger drop in asset values, according to BNY Mellon Fiduciary Solutions. Public plans, foundations and endowments also failed to meet targets due to declining asset values.

For the typical U.S. corporate plan, funded status dipped as low as 81.2 percent on August 24 but has since rebounded. Liabilities fell by 0.9 percent during the month, with the Aa Corporate discount rate rising by 9 basis points to 4.44 percent.

Plan liabilities are calculated using the yields of long-term investment grade bonds. Higher yields on these bonds result in lower liabilities. 

"The second half of August served as a wake-up call to investors who had been lulled to sleep by several months of low volatility in the markets," said Andrew D. Wozniak, head of BNY Mellon Fiduciary Solutions. "Corporate defined benefit plan sponsors were somewhat insulated from the full brunt of the volatility due to rising credit spreads, which led to a decline in liabilities."

Public defined benefit plans in August missed their return target by 4.7 percent as assets declined 4.1 percent, according to the August BNY Mellon Institutional Scorecard. Public plans have fallen short on year-to-date return targets by 6.6 percent and remain below their annual return target.

The August BNY Mellon Institutional Scorecard also noted that for endowments and foundations, real return was down 4.4 percent. According to the monthly report, asset returns for the typical endowment and foundation fell 4.3 percent over the past year, which is behind the spending plus inflation target by 9.8 percent.

"The decline in asset values that hit typical public defined benefit plans, endowments and foundations was primarily due to poor equity performance across the globe", said Wozniak.  "Weakness in China is likely to emerge as the culprit behind the declines."

Notes to Editors:

BNY Mellon Fiduciary Solutions is a division of The Bank of New York Mellon.

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 June 30, 2015, BNY Mellon had $28.6 trillion in assets under custody and/or administration, and $1.7 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 Follow us on Twitter @BNYMellon or visit our newsroom at for the latest company news.

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