The funded status of corporate defined benefit pension plans increased significantly in May to the highest level since July 2011, according to separate monthly reports from Mercer and BNY Mellon Investment Management.
The funded status of S&P 1500 companies' pension plans, as studied by Mercer, was up six percentage points to 86% while BNY Mellon reported a typical corporate pension plan's funded status rose 5.6 percentage points to 86.4%.
Both firms cited an increase of 46 basis points in the discount rate. Mercer reported liabilities were reduced by more than 7% during the month with the discount rate increasing to 4.11%. The aggregate pension deficit decreased by $150 billion during May and has been cut by more than 50% overall year to date, to $269 billion total from $557 billion.
Liabilities for the typical corporate plan fell 6.3% as the discount rate increased to 4.3%, while assets were up 0.2%, according to BNY Mellon. The Treasury discount rate also increased 43 basis points to 3.13%. Year to date, the funded status is up 10.1 percentage points; assets are up 8% and liabilities are down 4.7%.
“May was an excellent month for pension plans in terms of improving funded status,” said Jeffrey Saef, managing director and head of the investment strategy and solutions group at BNY Mellon, in a telephone interview. “The trend is definitely in place. There have been strong signs of economic improvement in the U.S. and parts of the world.”
Estimated aggregate assets of the S&P 1500 plans were $1.7 trillion as of May 31, relatively flat from the end of April. Estimated aggregate liabilities were $1.97 trillion, down 7.5%, according to Mercer.