U.S. corporate pension plans' funded status rose about 3 percentage points in November, driven by falling liabilities, said reports from Wilshire Consulting and Legal & General Investment Management America.
According to Wilshire, the aggregate funding ratio for S&P 500 companies with corporate pension plans rose 3.3 percentage points over the month to 80.6% due to a 5.2% drop in liability values, offsetting a 1.2% decrease in asset values.
“Despite positive U.S. equity returns, asset values fell due to negative returns for most other asset classes during the month. The fall in asset values was more than offset by the fall in liability values resulting from the nearly 40 basis point rise in long corporate bond yields during the month. This is the fifth consecutive month of either flat or rising funded ratios, and this month's increase is the largest in the past 12 months,” said Ned McGuire, vice president and a member of the pension risk solutions group of Wilshire Consulting, in a news release on the results. “The post-election, Trump-bounce in corporate funding ratios was driven by a more than 4.5% increase in the Wilshire 5000 Total Market index (for U.S. equities) during the month and rising corporate bond yields, which pushed liability values lower for the fourth consecutive month.”
According to LGIMA's monthly Pension Fiscal Fitness Monitor, the funded status of a typical U.S. corporate pension plan with a 60% allocation to global equity and 40% to core fixed income rose 3.4 percentage points to 80.9% in November.
Liabilities for the average plan declined 4.6%, due to a 37-basis-point increase in the discount rate. Assets dropped 0.5% over the month.
