Two estimates issued today showed opposite views of corporate plans funded status in May.
A Mercer report said the aggregate funded status of S&P 1500 companies pension plans dropped an estimated four percentage points to 83% last month, resulting in a decline of $85 billion in assets for the month and an aggregate deficit of $252 billion.
Markets are still volatile and unpredictable, Adrian Hartshorn, a member of Mercers financial strategy group, said in a news release. The $85 billion loss in May shows that plan sponsors continue to be exposed to changes in the value of plan assets, predominantly equities, and changes in the value of plan liabilities, which behave like bonds.
In a separate report, BNY Mellon Asset Management said the estimated funded status of the typical U.S. corporate pension plan was up 0.6 percentage points in May to 78.6%, according to its Pension Liability Index.
BNY Mellons increase marks the fifth straight month the funding ratio for the typical plan has increased, according to a news release.
The Pension Liability Indexs hypothetical moderate risk portfolio consists of 50% of the Russell 3000, 40% of the Barclays Capital Aggregate bond and 10% of the MSCI EAFE indexes. Assets for the typical portfolio increased 4.1% and liabilities increased 3.3% in May, according to the news release.
We have been anticipating a decline in long Aa corporate bond yields for some time, and in May we began to see a move in this direction, Peter Austin, executive director of BNY Mellon Pension Services, said in a news release. The 40-basis-point decline we observed in May lowered the discount rate for these bonds to 6.85% and drove pension plan liabilities higher. We remain wary of a continued decline in corporate bond yields, which would further increase pension plan liabilities.