Pension liabilities of U.S. corporations rose an average 3.5% in August, compared with a 2.1% increase the previous month, according to the Mellon Pension Liability Indexes. Lower interest rates led to the average increase, causing the funded status of a typical U.S. pension plan to fall 1.4 percentage points in August, compared with a 1.5 percentage-point drop in July. Since the beginning of the year, plans' average funding status is up 6.3%, according to Mellon's data. For the same period, the average plan's assets were 5.1% higher while liabilities were down 1.2%.
"Capital markets increasingly are concerned about a slowing economy while fears of inflation have eased," Peter Austin, executive director of Mellon Pension Services, in a news release. "The combination has brought long-term interest rates down 40 basis points since the end of June. While asset values have benefited, the market value of pension liabilities has grown even more."
The Mellon Pension Liability indexes are a set of benchmarks that uses current discount rates to measure the performance of liabilities.