Pension Plan Funded Status Improved in December

January 5, 2011 ( - The funded status of the typical U.S. corporate pension plan climbed 3.8 percentage points higher to 84.3% in December 2010, the best position since March 2010, according to monthly statistics published by BNY Mellon Asset Management.
While the funded status for pensions was volatile throughout the year, it finished 2010 0.8 percentage points above the December 2009 level of 83.5%, the BNY Mellon Pension Summary Report for December 2010 showed.

For December, assets for the typical corporate plan increased 3.8%, driven by a 6.8% rise in U.S. equities and an 8.1% boost in international stocks, BNY Mellon said in a press release.   Liabilities fell 0.9% in December, due to an increase in bond yields as the Aa corporate discount rate rose from 5.32% to 5.43%.

“The 13.1 percentage point improvement in the typical plan funded status since the end of August is the largest four-month positive change recorded since we began reporting our monthly pension statistics in 2006,” said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management, in the press release.  “The driver of this improvement was U.S. equities, which posted returns in excess of 15% during this same period. A 51-basis point increase in the Aa corporate discount rate was an important, but secondary, contributor.”

Austin added: “We expect U.S plan sponsors to continue efforts to closely manage plan funding volatility. In particular, we believe adoption rates for risk reduction programs based on target funding levels will increase, especially in the presence of higher interest rates and strong equity returns.”