October 4, 2012 (PLANSPONSOR.com) – According to BNY Mellon, the funded status of U.S. corporate pensions increased for the second straight month to 75%, the first two-month winning streak since February.
The funded status of the typical U.S. corporate pension plan increased 1.8 percentage points in September, benefiting from a decline in liabilities as interest rates rose, the BNY Mellon Pension Summary Report for September 2012 said.
Assets for the typical plan increased 1.7% as stock markets in the U.S. and internationally continued to rally. Liabilities for the typical plan declined .7% as the Aa corporate discount rate rose six basis points to 3.78%. Plan liabilities are calculated using the yields of long-term investment grade bonds; higher yields on these bonds result in lower liabilities.
Year to date, the funded status of the typical U.S. corporate plan is down .3 percentage points.
“Pension plans have been benefiting all year from rising equity markets but have had their gains offset by persistent low interest rates that have sent liabilities higher,” said Jeffrey B. Saef, managing director of BNY Mellon Asset Management and head of the BNY Mellon Investment Strategy and Solutions Group.