LGIMA found the funding ratio of a typical corporate pension plan rose by 2.3 percentage points to 79.2%, primarily driven by an increase in U.S. Treasury rates and performance of global equities. LGIMA estimates Treasury rates increased by 15 basis points, while credit spreads tightened by 1 basis point, resulting in the average discount rate increasing 14 basis points.
Liabilities for the typical plan decreased 1.85%, while plan assets with a traditional 60% equity/40% bond asset allocation increased by roughly 1.08%, LGIMA said.
According to Northern Trust, the average funding ratio for S&P 500 companies with defined benefit plans increased to 84% in September from 82.5% in August.
Global equity markets were up about 2.1% during the month and drove the change, while the discount rate increased to 2.69% from 2.56% during the month.
“Pension plans saw some relief in funded ratios in September as discount rates increased and equity markets recovered,” said Jessica Hart, head of the OCIO retirement practice at Northern Trust Asset Management, in a news release announcing the results. “Even though the Fed cut rates by 25 basis points, the average liability discount rate climbed by 13 basis points. This highlights the reality that for pension plans, movement at the long end of the yield curve is more impactful than the headline Fed rate.”
Wilshire in its report said its estimate of the aggregate funding ratio of U.S. corporate pension plans showed an increase of 1.8 percentage points to 84.9%.
The change in the estimate came from a 2.1% decrease in liabilities driven by the increase in discount rates, partially offset by a 0.1% decrease in asset values.
It is the second largest increase in the estimated aggregate funding ratio this year in Wilshire’s monthly report. The estimated funding ratio rose to 90.8% as of April 30 from 88.7% as of March 31.