December Best Month of Year for Corporate Pension Funding

January 6, 2009 ( corporate pension plans turned in their best performance in terms of funding ratio for 2009 in December, up 3% to 85.5%, according to the latest monthly data from BNY Mellon Asset Management.

A news release said the driving forces behind the numbers were a healthier equity market and a yield increase for long Aa corporate bonds.

According to the announcement, assets for the typical U.S. corporate pension plan rose 0.9% and liabilities declined 2.6% for the month.  For the year through December 31, 2009, BNY Mellon reported the funding ratio for the typical U.S. corporate pension plan is up 11.6%.

“On average, U.S. corporate pension plans have improved their funding status during five of the last six months of 2009 as equity markets in the U.S. and around the world rallied,” said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management, in the announcement.  “But the bigger impact on funded status during the month of December was the 25 basis-point increase in the Aa corporate bond discount rate, which is at its highest level since June.” 

Austin said plan sponsors are expected to continue their risk-reduction efforts in 2010 to help dampen the potential impact of market volatility.