Last month, the funded status of the typical U.S. corporate pension plan increased 2.9 percentage points to 90.1%, as rising interest rates suppressed liabilities.
These are the findings of the BNY Mellon Investment Strategy and Solutions Group (ISSG).
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Public plans, endowments and foundations exceeded their targets for the month thanks to increases in asset values, reveals the BNY Mellon Institutional Scorecard.
For the typical U.S. corporate plan, assets in April increased 0.7%, while liabilities fell 2.6% as the Aa corporate discount rate rose 20 basis points to 4.06%.
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Plan liabilities are calculated using the yields of long-term investment grade bonds. Higher yields on these bonds result in lower liabilities.
The funded status is 0.5 percentage points lower than at this time last year and 2.8 percentage points higher than at the beginning of the year.
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“Corporate plans are seeing the benefits of a slight rise in interest rates, which have increased for three consecutive months and are pushing down liabilities,” says Andrew D. Wozniak, head of fiduciary solutions, ISSG. “Emerging markets equity and private equity both had strong months, benefiting public plans, endowments and foundations.”
Public DB plans in April exceeded their return target by 0.9% as assets returned 1.5%, the monthly report shows. Year over year, public plans remain below their return target by 1.8%.