Public Plans, Foundations and Endowments Miss Targets
NEW YORK, July 7, 2015 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan increased 1.5 percentage points in June to 87.8 percent, as liabilities declined more rapidly than assets during the month, according to the BNY Mellon Investment Strategy and Solutions Group (ISSG).
The June BNY Mellon Institutional Scorecard is the first to reflect a realignment in the December 2014 funded status for the typical U.S. corporate plan. The realignment resulted from recent changes in mortality tables produced by the Society of Actuaries to estimate life expectancies. These longer life expectancy assumptions caused a five percentage-point reduction in the December 2014 funded status, which was then carried forward, ISSG said.
"We expect additional revisions as more companies adopt these changes in the mortality tables," said Andrew D. Wozniak, head of fiduciary solutions, ISSG.
Public plans, endowments and foundations all missed their return targets in June due to falling asset values, ISSG said.
For the typical U.S. corporate plan, assets in June fell 2.1 percent; while liabilities declined 3.8 percent as the Aa corporate discount rate rose 29 basis points to 4.49 percent, according to the June scorecard. This was the fifth consecutive month for a rise in the discount rate and the third consecutive month in which most asset classes outperformed the liability at the typical corporate plan, ISSG said.
Plan liabilities are calculated using the yields of long-term investment grade bonds. Higher yields on these bonds result in lower liabilities.
"The significant rise in the Aa corporate discount rate in June continued the momentum toward lower liabilities," said Wozniak. "Discounting the impact of the new mortality tables, the funded status of typical corporate plans continues to improve because of the declining liabilities."
Public defined benefit plans in June missed their return target by 2.3 percent as assets declined 1.7 percent, according to the monthly report. Year over year, public plans are 6.8 percent below their annual return target, ISSG said.
For endowments and foundations, the real return in June was -2.0 percent as assets fell 1.3 percent, ISSG said. Year over year, endowments and foundations are behind their inflation plus spending target by 5.6 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 $1.7 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 March 31, 2015, BNY Mellon had $28.5 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 www.bnymellon.com, or follow us on Twitter @BNYMellon.
All information source BNY Mellon as of March 31, 2015. 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.
+1 212 922 7859
SOURCE BNY Mellon