The funding ratio of the typical U.S. corporate defined benefit pension plan rose 11% in the fourth quarter to 91%, according to Legal & General Investment Management America.
“The 11% increase in funding ratios marks the largest quarter-over-quarter change since the inception” of the Pension Fiscal Fitness Monitor series, which dates back more than 15 years, Aaron Meder, head of U.S. pension solutions, said in a news release. “We estimate, on average, the U.S. corporate plan funding status is approaching 90%.”
The quarterly increase came from a combination of equity gains and liability decreases, according to L&G’s Pension Fiscal Fitness Monitor. “The fourth quarter was fueled by strong economic news, leading to higher pension funding levels as equity markets moved higher and bond yields rose,” Mr. Meder said in the release.
The monitor assumes a typical liability profile and an investment strategy of 65% equities and 35% bonds.