Investing February 12, 2007

Pension Funding Status Ticks up in January

February 12, 2007 (PLANSPONSOR.com) - The typical U.S. defined benefit pension plan saw its funding status increase by 2.4% in January - the latest performance in a trend that started in the fourth quarter of 2002.
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That was the latest showing of the Mellon Pension Liability Indexes from the Mellon Financial Corporation, according to a news release.

“U.S. equities were quite strong in January, helping to drive up the value of assets in most pension plans by 1%,” said Peter Austin, executive director of Mellon Pension Services, in the news release. “Pension plans also benefited from a 1.4% decline in liabilities, which was linked to a 10-basis-point increase in long-term rates. Continuing economic strength contributed to the higher long-term rates.”

Higher yields reduce the value of pension liabilities and bonds. Unexpected changes in a plan’s demographics, among other factors, also affect the size of the benefit liability.

More information about the indexes is  here .

The funded status of a typical U.S. pension plan improved by 3.5 percentage points in December 2006 and 10.9 percentage points for all of 2006, according to Mellon (See Mellon Says 2006 Better for Pension Funding ).

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