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Pension Funds

Corporate pension funding falls in August on declining discount rates — 2 reports

The funded status for U.S. corporate pension plans declined in August, said reports from Mercer and Northern Trust Asset Management.

According to Mercer, the estimated aggregate funding ratio of defined benefit plans sponsored by S&P 1500 companies was 82% as of Aug. 31, down 1 percentage point from July.

Discount rates fell 12 basis points in August to 3.64%, boosting plan liabilities. The S&P 500 and MSCI EAFE indexes, meanwhile, returned 0.05% and -0.31%, respectively.

The estimated aggregate value of pension fund assets of S&P 1500 companies totaled $1.92 trillion as of Aug. 31, up from $1.91 trillion as of July 31, while estimated aggregate liabilities totaled $2.35 trillion, up from $2.32 trillion at the end of July.

"With rates down another 10 basis points in August and about 40 basis points over the year, growth asset performance has not been able to drive improvement in funded status," said Scott Jarboe, a partner in Mercer's wealth business, in a news release. "We expect plan sponsors may be pondering contributions in September ... to improve funding levels and advance their destination while also defraying future PBGC costs."

In another monthly report, Northern Trust found the average funding ratio for S&P 500 companies with corporate DB plans fell 70 basis points in August to 81.7%.

A 10-basis-point-drop in the discount rate to 3.65% and -0.1% return from global equities were behind the funding decline, Northern Trust said in a news release.