The funded ratio of the typical corporate U.S. pension plan fell 6 percentage points in June to 74%, the result of U.S. stock market declines and low interest rates, according to an analysis by BNY Mellon Asset Management.
The drop puts the funded ratio of the typical plan at its lowest level since February 2009, when the funded ratio was 73%. Funded status has declined 9.5 percentage points since the beginning of 2010.
The analysis almost mirrors a report released Monday by Mercer, saying the funded ratio of S&P 1500 companies dropped five percentage points in June to 73%.
Assets for the typical corporate U.S. pension plans dropped 2.3% in June, while liabilities increased 5.6% over the same period of time.
“What we saw in May and June is two months of declining interest rates (along with) a dramatic drop in asset values,” Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management, said in a telephone interview.
He said the market is “very jittery,” driven in part by the sovereign debt crisis.
While the drop in funded status is bad news for pension plans, Mr. Austin said it refocuses attention on commitment to funding and better managing risk.