Funding ratios for corporate pension plans increased in May, according to reports from Wilshire Consulting, Mercer and Legal & General Investment Management America.
Wilshire's monthly report noted that the aggregate funding ratio for U.S. corporate plans increased by 0.8 percentage points as of May 31 to 82% from April 30. The monthly change in funding resulted from a 1.8 percent increase in asset values partially offset by a 0.8 percent increase in liability values.
"May's increase in funded ratio was primarily driven by a second consecutive monthly increase for global public equities," said Ned McGuire, managing director and a member of the investment management and research group of Wilshire Consulting, in a news release announcing the results.
Mercer said the estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 1 percentage point to 81% as of May 31 because of an increase in equity markets that offset a decrease in discount rates to 2.69% from 2.77%.
The estimated aggregate deficit of pension fund assets of S&P 1500 companies totaled $476 billion as of May 31, down $14 billion from the end of April.
"Funded status rose 1% in May as interest rates decreased slightly and equity markets improved," said Scott Jarboe, a partner in Mercer's wealth business, in a separate release. "Equity volatility has continued to decrease and during May we saw healthy improvements in both U.S. and international markets.
Mr. Jarboe added that while funded status is down 7% since the beginning of the year, "there is some good news for plan sponsors. The House recently passed another stimulus bill, the HEROES Act, which includes immediate and longer-term funding relief provisions. However, now the bill moves to the Senate and negotiations are expected to take considerable time before potential agreement on a final bill."
Meanwhile, LGIMA found the funding ratio of a typical corporate pension plan increased by 1.8 percentage points to 75.2%, primarily driven by higher Treasury rates and an increase in global equities. LGIMA estimated U.S. Treasury rates rose by 9 basis points while credit spreads tightened by 10 basis points, resulting in the average discount rate decreasing by 1 basis point.
Liabilities for the typical plan increased by roughly 0.3%, while plan assets with a traditional 60% equity/40% bond asset allocation increased by roughly 2.8%, LGIMA said.
