A Mellon news release said that while the typical plan’s liabilities increased 1% in June 2006 as a result of lower interest rates, assets of a moderate-risk benchmark portfolio ticked up slightly by 0.2%, at a slower pace than the rise in liabilities.
Mellon said this combination resulted in 0.8% deterioration in a typical plan’s funded status.
On a year-to-date basis, the funded status of a typical plan improved by a healthier 9%. Through June 2006, the liabilities of a typical pension plan dropped by 6.5% because of higher interest rates. At the same time, the assets of a moderate-risk benchmark portfolio were up 2.3%.
“The steady rise in interest rates during the first five months of the year was interrupted in June,” said Peter Austin, executive director of Mellon Pension Services, in the news release. “Long-term rates declined in June as investors anticipated a near-term end to the Fed’s tightening. These factors halted the decline in liabilities that we had seen during the first five months of the year.”