Reports from Wilshire Advisors and Legal & General Investment Management America estimated that funding ratios for U.S. corporate pension plans inched up slightly in May, but a report from Mercer calculated that ratios dropped over the course of the month.
As measured by Wilshire, U.S. corporate pension plans' aggregate funding ratio rose 0.1 percentage points to 94.2% in the month ended May 31. The investment consulting firm attributed the change to a 0.6 percentage-point increase in asset values partially offset by a 0.7 percentage-point increase in liability values.
Ned McGuire, managing director and a member of the investment management and research group of Wilshire Advisors, said in a news release announcing the results that May was the seventh month in a row where corporate funding ratios increased, the longest such streak since August 2016 to March 2017, when the funded ratio increased by 7.3 percentage points to 83.2% from 75.9%.
"May's funded ratio is at its highest level since Wilshire has been aggregating data for U.S. corporate pension plans on a monthly basis and since Wilshire's 2007 corporate funding study on an annual basis," Mr. McGuire added.
Meanwhile, LGIMA estimated that the funding ratio of an average corporate pension plan increased by 0.3 percentage points to 91.4% in May, primarily due to strong equity performance. LGIMA estimated U.S. Treasury rates fell by 2 basis points while credit spreads tightened by 2 basis points, resulting in the average discount rate dropping by 4 basis points.
Liabilities for the typical plan increased by 0.7%, while plan assets with a traditional 60% equity/40% bond asset allocation increased by roughly 1.1%, LGIMA said.
Meanwhile, Mercer estimated that the monthly estimated aggregate funding ratio of defined benefit plans sponsored by S&P 1500 companies decreased by 1 percentage point to 95% as of May 31 because of a decrease in discount rates — to 2.84% from 2.89% — partially offset by an increase in equities markets.
The estimated aggregate deficit of pension fund assets of S&P 1500 companies totaled $106 billion as of May 31, up by $4 billion from the end of April.
“May was a relatively quiet month for pensions as U.S. equities cooled off, with funded status ending roughly flat month over month,” said Scott Jarboe, a partner in Mercer’s Wealth Business, in a news release announcing the results. “We saw interest rates rise considerably earlier this year but they have decreased the past two months as the Fed continues to keep short term interest rates near zero even while equity markets remain near all-time highs.”
Mr. Jarboe added: “There is quite a bit of uncertainty in the market due to growing concerns with potential inflation, which could disrupt the bull market we have seen over the past year.”