Funding ratios for U.S. corporate pension plans rose in February, according to monthly reports from Legal & General Investment Management America and Mercer.
Following a similar report issued by Wilshire Consulting, LGIMA found the funding ratio of a typical corporate pension plan increased 1.4 percentage points to 87.9%, primarily driven by positive global equity returns over the month.
LGIMA estimates Treasury rates increased by 8 basis points, while credit spreads decreased 5 basis points, resulting in the average discount rate rising 3 basis points in total.
Liabilities for the typical plan decreased 0.2%, while plan assets with a traditional 60% equity/40% bond asset allocation increased by about 1.6%, LGIMA said.
According to Mercer, the estimated aggregate funding ratio of defined benefit plans sponsored by S&P 1500 companies increased by 2 percentage points in the month to 90% as of Feb. 28 due to an increase in U.S. and international equity markets.
Discount rates rose by 5 basis points to 4.09% in the month.
The estimated aggregate deficit of pension fund assets of S&P 1500 companies totaled $217 billion as of Feb. 28, down $45 billion from the end of January.
"February was another strong month for equity markets driving funded status higher," said Scott Jarboe, a partner in Mercer's U.S. wealth business, in a news release. "With strong performance in equities since the beginning of the year, the market environment has proven plan sponsors should be ready at all times to act on opportunities as funded status can change dramatically in a short period of time. Recent gains in funded status could open doors to risk transfer and management strategies that seemed less feasible just two months ago after the sharp downturn to end 2018."
