The funding ratio of the typical U.S. corporate pension plan increased 4.4 percentage points to 80.3% in October, a result of strong equity returns and declining liabilities, according to BNY Mellon Asset Management.
Assets for the typical plan rose 2.5% in October, while liabilities declined 3.2%.
U.S. equity holdings returned 3.9% in October, and international stock holdings returned 3.6%.
“We knew it was going to be a good month in the sense that the plans recovered some of their funded status,” Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management, said in a telephone interview. “But it’s a small victory because the typical plan is only about 80% funded.”
He noted that he has seen increased interest in establishing “target-based programs” by plan sponsors to improve their funded status by a certain date.
He said the future of equity markets is opaque.
“You don’t know what the equity markets are going to do,” Mr. Austin said. “You have a higher confidence level with respect to believing or understanding where fixed income is going to go because it’s just a different animal. It dampens the volatility.”