Bond Yields Boost Pension Funded Status in June

The increase in funding was the result of a larger decrease in liability values compared to the decrease in asset values.

The aggregate funded ratio for U.S. corporate pension plans increased to 86.2% for the month of June, according to Wilshire Consulting.

“We estimate that overall the funded ratio for the plan sample increased by 0.6% from 85.6% in May to 86.2% in June,” stated Ned McGuire, vice president and member of the Pension Risk Solutions Group of Wilshire Consulting. “The improvement in funding levels was driven by a 3.5% decrease in liability values versus a 2.8% decrease in asset values. The asset result is due to negative returns for most asset classes, while liability values fell due to an increase in corporate bond yields.”                

The aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration in-line with the Citi Group Pension Liability Index – Intermediate. The Funded Ratio is based on the CPLI – Intermediate liability, with service cost, benefit payments and contributions in-line with Wilshire’s 2015 corporate funding study. The most current month end liability growth is estimated using the Barclays Long Aa+ U.S. Corporate Index.

The assumed asset allocation is:

  • U.S. Equity – 32%;
  • Non-U.S. Equity – 21%;
  • Core Fixed Income – 18%;
  • Long Duration Fixed Income – 27%;
  • Real Estate – 2%.