Down Market Takes a Toll on U.S. Pension Plans

July 8, 2008 ( - The bad performance of U.S. stocks was the primary reason for the 4.8% decline in the funded status of the typical U.S. pension plan in June, according to BNY Mellon Asset Management.

Asset returns of moderate risk pension portfolios fell 5%, while liabilities were down 0.2%, thanks to higher yields on longer-term corporate bonds, according to a BNY Mellon press release. Year-to-date, funding ratios for typical U.S. pension plans have fallen 3.7%.

“Looking ahead, we see continuing weakness in the global economy as well as continuing deleveraging of the U.S. financial system. These factors, along with the uncertainty of energy prices and energy policies, could dampen the equity markets and lead to higher interest rates. It is difficult to determine whether the resulting decline in liabilities will more than offset sluggish or non-existent gains in asset values,” said Peter Austin, executive director of BNY Mellon Pension Services, in the release.

The June drop in funded status follows two months of reported increases (See April Equity Markets Boost Plan Fundingand U.S. Pension Plans Get Another Boost in May ).