The funded status of the typical U.S. corporate pension plan declined 4.9 percentage points to 82.4% in January as the interest rate that determines liabilities fell to an all-time low, says the BNY Mellon Investment Strategy and Solutions Group (ISSG).
The Aa corporate discount rate, which is the key interest rate that determines these liabilities, finished the month at 3.56%, sending liabilities 7% higher.
Read: U.S. corporate pension plan funding levels decline
While assets for the typical corporate plan increased 1% in January, this rise was swamped by the massive increase in liabilities. The rise in assets was also tempered by the weak performance of U.S. equities, which detracted from improvements in other asset classes.
Public DB plans, endowments and foundations also missed their return targets, as all categories were hurt by weak U.S. equities markets.
“The huge fall in funded status in January, combined with the changes in the mortality assumptions that many plans implemented in December 2014, means that many corporate plans saw their funded status drop by more than 10 percentage points in two months,” says Andrew D. Wozniak, head of fiduciary solutions, with ISSG.
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