BNY Mellon: Corporate plan funding declines take vacation in August

The funded status of the typical corporate defined benefit plan increased 1.8 percentage points to 73.2% in August, according to BNY Mellon Asset Management's monthly funded status report.

Assets increased 1.5% for the month, while liabilities decreased 0.9% as the discount rate increased eight basis points to 3.72%.

For the first eight months of this year, liabilities have increased 12.1% compared to a 9% growth in assets.

August was a “really quiet” month in regard to bad news and volatility, especially compared to last year when the typical funded status decreased 5.6 percentage points, said Jeffrey Saef, managing director at BNY Mellon Asset Management and head of the investment strategy and solutions group.

“I wish I could say we will have more (months like) August, but I don't think so,” Mr. Saef said in a telephone interview. “I don't think we will get the calmness that August was. I think the fall will be more volatile, but I don't know if that will be good or bad.”

U.S equity markets returned 2.5% in August while international developed markets equities were up 2.7%.

Volatility is expected to increase the rest of the year with more focus on Europe, the U.S. elections, and the looming mandatory spending cuts and expiration of tax breaks, Mr. Saef said.