The funding ratio of the typical U.S. corporate pension plan fell 5.6 percentage points in August to 71.3%, a result of slumping stock markets and a drop in the Aa corporate bond rate, according to an analysis by BNY Mellon Asset Management.
Assets for the typical corporate U.S. pension plan declined 2.1% in August, while liabilities increased 5.5% over the same time period.
U.S. equities in pension plan holdings fell 4.7% and international stock dropped 3.1% in August. The Aa corporate bond rate fell to 4.92% in August, from 5.29% a month earlier.
Peter Austin, executive director of BNY Mellon Pension Services, said in a telephone interview that the typical corporate plan’s funded ratio has declined 14 percentage points since March.
“It’s equivalent to what happened a decade ago (2001 to 2002) when we saw interest rates drop with equity markets dropping as well,” he said. “Today, equity market volatility is a reflection of a lack of confidence in the markets, as opposed to 18 months ago when it was more than just confidence and fundamentals that were driving equity market declines.”