May was a good month for pension funding ratios, although the details vary depending on the source.
According to Wilshire Consulting, for example, the aggregate funded ratio for U.S. corporate pension plans increased nearly one percentage point, to 84.9 percent. The increase of 0.9 percent was due to a larger decrease in liabilities than the decrease in asset values.
The picture from the BNY Mellon Investment Strategy and Solutions Group (ISSG) was even rosier, with the group’s estimate of the increase in funded levels at 1.5 percent to 91.6 percent. However, ISSG said that public plans, foundations, and endowments missed their targets for the month, with flat markets failing to increase the value of their assets.
Wilshire found that liability values fell by 1.8 percent, while asset values fell by only 0.8 percent. Asset classes outside of U.S. equities were responsible for the move, bringing negative returns, while falling liabilities owed that status to an increase in corporate bond yields.
The BNY Mellon Institutional Scorecard found that a fourth straight month of rising discount rates helped to reduce liabilities for corporate plans by 1.9 percent; the Aa corporate discount rate gained 15 basis points to 4.20 percent. Assets fell by just 0.2 percent.
According to ISSG, the corporate funded status is at its highest level since June of 2014, when it was 92.0 percent. It is also 4.3 percentage points higher than it was at the beginning of the year.
However, the month wasn’t so fortuitous for public defined benefit plans, which missed their return target by 0.7 percent as assets declined 0.1 percent. The ISSG report said that year over year, public plans are 3.5 percent below their annual return target.
In addition, ISSG said that the real return in May for endowments and foundations was -0.6 percent as assets were flat. It added that, year over year, endowments and foundations are behind their inflation plus spending target by 2.2 percent.
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