The funding ratio of the typical U.S. corporate defined benefit plan rose 0.4 percentage points to 88% in February, a result of strong returns in both U.S. and international equity investments, according to BNY Mellon Asset Management.
Assets for the typical plan increased 2.3% in February, the result of a 3.6% gain in U.S. equities and a 3.3% rise in international equities during the month, according to a news release from BNY Mellon Asset Management.
Liabilities increased 1.7% in February, while the corporate discount rate fell 10 basis points to 5.54%.
The funding ratio has improved 3.7 percentage points in the first two months of 2011.
“I think in general there is a sense that the economic recovery is well under way,” Peter Austin, executive director of BNY Mellon Pension Services, a unit of BNY Mellon Asset Management, said in a telephone interview. “And the trend for interest rates is higher rates. Most plan sponsors view it as a rising interest rate environment, which is good for them, and that a stronger economy should propel the stock market further.”
He said plan sponsors now must decide whether to continue allocations to equities or take them off the table and invest in bonds.