The estimated funding ratio of U.S. corporate pension plans inched upward in January as a drop in liabilities offset sluggish investment returns, two new reports from Wilshire Consulting and Legal & General Investment Management America show.
Wilshire's monthly report noted that the aggregate funding ratio for U.S. corporate plans increased by 0.4 percentage points to 95.8% as of Jan. 31 from Dec. 31. The slight increase in funding resulted from a 5-percentage-point decrease in liabilities that was partially offset by a 4.6-percentage-point decrease in assets.
"The liability value decreased due to the approximately 40 basis point increase in corporate bond yields used to value corporate pension liabilities," said Ned McGuire, managing director and a member of the investment management and research group of Wilshire Associates, in a news release announcing the results. "The rise in treasury yields accounted for nearly two-thirds of the increase in yields."
"Due to larger decrease in liability value, January's funded ratio is at its highest level since year-end 2007, estimated at 107.8%, before the great financial crisis," Mr. McGuire added.
LGIMA found in its monthly pension solutions monitor that the funding ratio of a typical corporate pension plan increased by 0.2 percentage points to 92.8% in January primarily due to strong performance from global equities.
LGIMA estimated U.S. Treasury rates rose 26 basis points while credit spreads widened by 13 basis points, resulting in the average discount rate rising by 5 basis points.
Liabilities for the typical plan decreased 4.1%, while plan assets with a traditional 60% equity/40% bond asset allocation increased about 3.8%, LGIMA said.
