LGIMA's monthly pension solutions monitor showed that the funding ratio of a typical corporate pension plan decreased by roughly 1.6 percentage points to 90.1% in November, primarily because of poor equity performance and lower Treasury yields.
LGIMA estimated that U.S. Treasury rates dropped 14 basis points for the month while credit spreads widened 12 basis points, resulting in the average discount rate dropping by roughly 2 basis points.
Liabilities for the typical plan increased 0.5%, while plan assets with a traditional 60% equity/40% bond asset allocation decreased by about 1.3%, LGIMA said.
Meanwhile, data from Insight Investment show that the funded status for corporate plans declined by 1.2 percentage points over the month to 93.4% as of Nov. 30.
Assets decreased by 1.4 percentage points, while liabilities dropped by 0.1 percentage points to 0.3%. The average discount rate, meanwhile, remained at 3.01%.
"In this environment of increased equity volatility and uncertainty regarding the impact of new COVID variants, plan sponsors should revisit their risk tolerance and potential implications for funded status volatility," said Sweta Vaidya, North American head of solution design at Insight Investment, in a statement issued Thursday.
According to Northern Trust, the average funding ratio for S&P 500 companies with defined benefit plans decreased to 93.8% in November from 95.2% in October.
The change was driven by global equity markets dropping about 2.4% in November along with the discount rate decreasing to 2.42% from 2.46% during the month.
"The decline occurred towards the end of the month as financial markets pulled back at the announcement of a new COVID variant, Omicron," Jessica K. Hart, senior vice president and head of the OCIO retirement practice at Northern Trust Asset Management, said in a news release Thursday. "It is premature to definitively state whether the variant's presence will be a lasting financial market issue. We expect key information on its global health and policy impacts to come over the next few weeks."