Funding Status of U.S. Pensions Declined in January

February 3, 2010 ( - Sliding stock markets and rising liabilities combined to reduce the funded status of the typical U.S. corporate pension plan in January - the first decline in funding status since October.

According to monthly figures published by BNY Mellon Asset Management, the funded status declined by 1.8 percentage points to 83.7%. Assets for the typical U.S. corporate pension plan fell 1.6% and liabilities increased 0.5% for the month, as reported by the BNY Mellon Pension Summary Report for January 2010. 

“Economic concerns weighed on U.S. stocks, which was the primary factor driving assets lower for the month,” said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management, in a press release. “International stocks fell even more than U.S. stocks, further contributing to the asset decline.  The yields on long Aa corporate bonds were mostly unchanged, but liabilities increased slightly due to interest accruals.”

Austin noted that the sudden reversal of stock markets in January serves as a reminder that volatility can quickly return to the markets and impact corporate plans’ funded status.

“While the funded status of plans improved significantly in 2009, the January performance reminds plan sponsors that risk is inherent in corporate pension plans, and requires close monitoring of plan assets to ensure that risk/return relationships are consistent with company objectives.  We are seeing an increase in liability driven investing (LDI) activity as more corporate plan sponsors seek solutions for their pension risk exposure,” Austin said in the announcement.