U.S. corporate DB plan funding stable in February

The funded status of U.S. corporate defined benefit plans saw little change in February, according to separate reports from Mercer and BNY Mellon Investment Management.

The funded status of pension plans of S&P 1500 companies, as studied by Mercer, remained at 77% as the aggregate pension deficit decreased by $3 billion. BNY Mellon reported the funded status of a typical corporate pension plan decreased 0.5 percentage points to 80.7%.

Jonathan Barry, a partner in Mercer's retirement risk and finance consulting group, said it was a relatively slow month with discount rates decreasing about eight basis points to 3.82% and equities gaining just more than 1%.

“For interest rates, we've seemed to hit something approaching a bottom,” Mr. Barry said in a telephone interview. Liability volatility should be close to bottoming out while equity markets are expected to remain volatile, he added.

According to BNY Mellon, liabilities increased 1.4% in February, outpacing the 0.8% gain in assets. The discount rate dropped eight basis points to 4.05%. The asset gains were limited by international developed markets equity, according to the report — U.S. equity markets returned 1.3% in the month compared with a -0.9% return for international developed markets.

Mr. Barry said what was interesting in February is that headline events, such as the sequestration and the Federal Reserve talking about keeping rates low, had little impact on the markets.

Estimated aggregate assets of the S&P 1500 plans were $1.64 trillion as of Feb. 28, up from $1.62 trillion at the end of January. Estimated aggregate liabilities were $2.12 trillion, up slightly from $2.11 trillion, according to Mercer.

— Contact Kevin Olsen at kolsen@pionline.com | @Olsen_PI