The funded status of the typical U.S. corporate pension plan reached 91% at the end of September, its highest level since June 2011, according to the BNY Mellon Institutional Scorecard.
It is an increase of 2.9 percentage points since the end of August. A strong equity market in September contributed to a rise of 3.1 percentage points while liabilities fell 0.2 percentage points.
The discount rate increased three basis points from the end of August to 4.81%.
While the current government shutdown in Washington will cause some short-term concerns, the long-term prognosis for funding looks better than 12 months ago, when the typical U.S. corporate plan's funding ratio was 75%.
“The biggest message is the shift is from high 70s funded status to high 80s and low 90s,” said Jeffrey Saef, managing director and head of the investment strategy and solutions group at BNY Mellon Asset Management. “It's a reversal of several of the factors (that caused the lower ratios). There's higher discount rates, higher confidence and higher equity prices.”
Typical foundation and endowment assets increased 3.3% in September. Assets are up 10.7% for the year ended Sept. 30, topping the spending-plus-inflation target by 440 basis points.