January was less than an ideal month for the funded status of U.S. corporate defined benefit plans, monthly reports from Mercer, BNY Mellon and Wilshire show.
In Mercer's report, the estimated aggregate funding ratio of S&P 1500 companies with defined benefit plans fell to 74% as of Jan. 31, down from 79% the month before.
Mercer cited poor domestic equity returns in a month that saw the S&P 500 index decrease by 3.1% in January, and especially a 48-basis-point drop in the typical discount rate for defined benefit plans to 3.33%.
Mercer's estimated aggregate plan assets totaled $1.9 trillion as of Jan. 31, compared to estimated aggregate liabilities of $2.55 trillion. The previous month, the estimated assets and liabilities were $1.89 trillion and $2.39 trillion, respectively.
Meanwhile, in the latest BNY Mellon Institutional Scorecard, the funding ratio of the typical U.S. corporate defined benefit plan plummeted in January as the gain in liabilities far outdistanced the gain in assets from market returns.
Falling 4.9 percentage points from the previous month to 82.4% as of Jan. 31, the typical plan's liabilities increased 7% during the month because the discount rate fell 44 basis points during that time period to 3.56%, the scorecard said.
Also lagging behind for the most part was the market in January, although the typical corporate DB plan did not suffer as much as the typical public DB plan.
“The highest nominal return for the month of January was in the corporate DB segment because of their allocation to long-duration bonds,” said Andrew D. Wozniak, head of fiduciary solutions of the investment strategy and solutions group within BNY Mellon Investment Management, in an interview.
The typical corporate DB plan returned 1% in January despite the drag of U.S. equities on performance, compared to the typical public DB plan, which returned -0.1% and the typical endowment and foundation, which returned -0.3%, according to BNY Mellon.
Wilshire Consulting, meanwhile, found the aggregate funding ratio for U.S. corporate defined benefit plans fell to 74.3% in January, down from 77.8% the previous month, as a result of a 5.7% increase in liabilities compared to a 0.9% increase in assets.
“The asset result is due to positive returns for fixed-income assets, while the liability value increased due to falling corporate bond yields,” said Ned McGuire, vice president and member of pension risk solutions group at Wilshire Consulting, in a news release.
Wilshire Consulting is the institutional investment consulting and outsourced CIO unit of Wilshire Associates.
