Funded Status of U.S. Corporate Pensions Falls Sharply in January, to 79.7 Percent, According to BNY Mellon Fiduciary Solutions' Monthly Institutional Scorecard

January marks third consecutive month of declines for corporate DB plans, as market conditions continue to challenge investors

Feb 08, 2016, 08:00 ET from BNY Mellon

NEW YORK, Feb. 8, 2016 /PRNewswire/ -- According to the BNY Mellon Institutional Scorecard—which is available for download, here—the funded status of typical U.S. corporate pension plans fell by 3.8 percent in January, to 79.7 percent. The S&P pension deficit is also estimated to have increased by $83 billion, to $411 billion over the month—as assets fell to $1.61 trillion, and liabilities rose to $2.02 trillion. Despite asset returns of negative 5.2 percent over the past year, the funded status of the typical U.S. corporate pension plan have still increased by 2.0 percent over the last 12 months, up from 77.7 percent.

"Plan sponsors are beginning to lose their patience with the onslaught of negative news surrounding their pension plans," said Andrew Wozniak, head of BNY Mellon Fiduciary Solutions. "Whether it is increased longevity driving liabilities higher, poor investment returns or the negative impact of lump sum payments on their funding percentage, some sponsors are beginning to think that the only solution to their problem is proactively funding their plans."

Public DB plans and foundations & endowments also performed poorly in January, as they failed to meet the Scorecard's monthly return targets, by 4.2 and 4.0 percent, respectively. Assets dropped by 3.6 percent for both investor types.

The typical public DB plan is now 12.6 percent behind its one-year return target as assets have, in total, dropped 5.1 percent over that time period. Similarly, foundations & endowments are short of their annual return target by 12.0 percent, despite modest inflation over the past year.

"The rally we saw in late December was short-lived, as markets took a sharp drawdown in early and mid-January," said Wozniak. "Of the asset classes our Scorecard tracks, only Global Fixed Income, up 0.9 percent, and Long Gov/Credit, up 2.1 percent, showed positive returns on the month. Equities of all types, REITs, High Yield Bonds, Emerging Market Debt and Hedge Funds were all down. It was certainly a tough environment for investors."

January now marks the third consecutive month in which the funded status of the typical U.S. corporate pension plans decreased; and the third consecutive month in which public defined benefit plans and foundations & endowments failed to meet their monthly return targets.

Notes to Editors:

BNY Mellon Fiduciary Solutions is a division of The Bank of New York Mellon.

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