The funded status of the typical U.S. corporate defined benefit pension plan dropped 1.8 percentage points in April despite another month of asset growth, according to BNY Mellon Investment Management's monthly pension summary.
The funded status declined to 80.8% at the end of the month, but still has notched a 4.5-percentage-point improvement year-to-date. The drop in April was due to the discount rate decreasing 25 basis points to 3.84%, the lowest level since November. Liabilities increased 4% for the month, while assets increased 1.7%.
Unlike the two previous years when a strong first quarter was quickly followed by a drop, this year is not comparable, said Jeffrey Saef, managing director and head of the investment strategy and solutions group. April sputtered with some weaker economic data, but Mr. Saef said the momentum is toward an improving economy, rallying equity markets, and rising interest rates and credit spreads.
“I think the trend is toward that sunnier picture … with fits and starts,” Mr. Saef said in a telephone interview. “The general trend by year-end will be higher interest rates and spreads, but not a lot.”
Last month, U.S. equity markets returned 1.6%, while international developed markets were up 5.6%.
For the year, assets are up 7.8% for the typical DB plan, while liabilities have increased 1.7%.