The funding ratio of the typical U.S. corporate defined benefit plan rose 3.3 percentage points to 87.6% in January, a result of increases in both equity investments and in the Aa corporate discount rate, according to BNY Mellon Asset Management.
Assets for the typical plan increased 1.4% in January, the result of a 2.2% gain in U.S. equities and a 2.4% rise in international equities, according to a news release from BNY Mellon Asset Management.
Liabilities declined 2.4%, while the corporate discount rate rose 21 basis points to 5.64%.
The typical plan’s funding status is up 16.3 percentage points since August, making it the longest and steepest funded status improvement since BNY Mellon began reporting pension statistics in 2006, Peter Austin, executive director of BNY Mellon Pension Services, a unit of BNY Mellon Asset Management, said in the news release.
In an interview, Mr. Austin said the increase in interest rates was the main contributor to funded status improvement in January, as opposed to asset increases.
“I think rising interest rates are something most economists have factored into the next 12 months,” he said in a telephone interview. “The debate is how high will interest rates rise.”