Funded Status of U.S. Pensions Rises to 74.8% in October

November 4, 2011 ( - Strong asset returns and no change in liabilities in October drove a 4.7 percentage-point increase in the funded status of the typical U.S. corporate pension plan, according to BNY Mellon Asset Management.    

The increase, fueled by strong performances in the equity markets, brought the funded status for the typical plan to 74.8%. Year-to-date, the funded status has declined 10.3 percentage points, according to the BNY Mellon Pension Summary Report for October. 

For the month of October, assets for the typical corporate plan increased 6.8%.  The rebound in equities reversed a three-month trend of falling stock values, the report said. Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. As there was no material movement in these yields, the liabilities held steady. 

“Apparent progress toward a solution to the European debt crisis resulted in investor optimism,” said Jeffrey B. Saef, Managing Director, BNY Mellon Asset Management, and Head of the Investment Strategy & Solutions Group, in a press release. “However, as the probability of a resolution rises and recedes, we see continuing market volatility.” 

Saef added that global events such as the European debt crisis and the U.S. budget negotiations have become important factors for pension funds as they make asset allocation decisions. “If favorable outcomes can be achieved for these issues, it could set the stage for continuing the rally in equities that we saw in October. Such a rally would provide significant relief to the funding pressures that sponsors face.”