The funding ratios of U.S. corporate pension plans remained relatively unchanged during the month of August, said reports from Legal & General Investment Management America and Wilshire Consulting.
The funding ratio of a typical U.S. corporate pension plan fell slightly during the month of August, said LGIMA's monthly report. The funding ratio fell 0.2 percentage points to 75.5%. Liabilities were up 0.4% because tightening of overall credit spreads increased liabilities 0.9%, offsetting a small rise in Treasury rates that lowered that component of liabilities by 0.5%.
The report assumes the typical plan has a traditional 60% global equity and 40% aggregate fixed-income asset allocation. Assets fell 0.16% during the month.
Global equities and the S&P 500 index rose 0.39% and 0.14%, respectively, during the month of August, LGIMA said.
According to Wilshire Consulting's monthly report, U.S. corporate pension plans' aggregate funding ratio rose 0.2 percentage points in August to 76.2%. The year-to-date funding ratio has dropped 5.1 percentage points from 81.3%.
The change in the aggregate funding ratio resulted from a decrease in liabilities of 0.3% that partially offset a 0.1% drop in assets.
“Asset values decreased in August due to benefit payments more than offsetting a slight uptick in overall asset return during the month,” said Ned McGuire, vice president and a member of the pension risk solutions group at Wilshire Consulting, in a news release. “The Wilshire 5000 Total Market index gained 0.3% during the month. Rising corporate bond yields used to value pension liabilities decreased liability values slightly in August.”
Wilshire estimates the aggregate funding ratio of S&P 500 companies with pension plans.