Funded status of U.S. plans hits five-year high

The funded status of the typical U.S. corporate pension plan in November improved 2.1 percentage points to 93.9%, which was the highest level since September 2008.

Higher interest rates lowered liabilities, and strong equities boosted assets for U.S. corporate plans, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG).

“Corporate bond yields have resumed their upward march, following a pause in October,” says Jeffrey B. Saef, managing director with BNY Mellon and head of ISSG.

“The corporate discount rate is now 109 basis points higher than in November of 2012, and the funded ratio for corporate pension plans is up 16.8 percentage points since the beginning of the year,” he adds. “As a result, we see more plan sponsors reducing their exposure to market volatility.”

Endowments and foundations also improved their financial situation as a result of their holdings in hedge funds and private equities, while public DB plans held steady, ISSG notes.

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