The funded status of corporate defined benefit plans rose in June because of falling liabilities, said reports from BNY Mellon and Aon Hewitt.
The funded status of the typical U.S. corporate pension plan rose 1.5 percentage points to 87.8% in June, said the BNY Mellon Institutional Scorecard.
Liabilities fell 3.8% in the month, the result of a 29-basis-point increase in the discount rate to 4.49%. June also marks the fifth consecutive month of discount rate increases and the largest monthly increase in two years, said Andrew D. Wozniak, head of fiduciary solutions of the investment strategy and solutions group within BNY Mellon Investment Management, in a telephone interview.
Assets also declined 2.1% for the typical corporate DB plan in June, hampered by low investment returns on global real estate investment trusts and long-duration bonds, which returned -3.8% and -3.7%, respectively, over the month.
For the quarter, the funding ratio is up 5.6 percentage points.
Other plan types that BNY Mellon monitors — public DB plans, and endowments and foundations — returned -1.7% and -1.3%, respectively, in June.
Despite missing its overall return target of 0.7%, the typical endowment and foundation benefited from its higher allocation to hedge funds, one of the better-performing asset classes in June (-0.2%) and its zero allocation to long-duration bonds, Mr. Wozniak said.
BNY Mellon further noted in its report that the Dec. 31 funding ratio for the typical corporate DB plan was revised to 82.3% from 87.3% to reflect strengthened mortality assumptions that boosted plan liabilities and drove the funded status lower.
Separately, the aggregate funding ratio of S&P 500 companies with defined benefit plans improved to 83.4% at the end of June from 82.9% the previous month, Aon Hewitt said.
Liabilities and assets declined 3% and 2.4%, respectively, over the month.
For the quarter, the funded status is up 2.7 percentage points, according to Aon Hewitt.