Funded Status of U.S. Corporate Pensions Rises to 91.0 Percent in September, according to BNY Mellon ISSG

Public Pension Plans, Endowments and Foundations Exceed Targets as Equities Rise

Oct 03, 2013, 07:25 ET from BNY Mellon

NEW YORK, Oct. 3, 2013 /PRNewswire/ -- Rising equities in the U.S. and international markets lifted the funded status of typical U.S. corporate pension plans 2.9 percentage points to 91.0 percent in September, the first time they have topped that level since June 2011, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG). 

Public pension plans and endowments and foundations in the U.S. also exceeded their targets in September, ISSG said.

"Rising above a funded status level of 90 percent is important to many corporate pension plans as they are more likely to implement strategies that can lower a plan's exposure to market volatility," said Jeffrey B. Saef, managing director, BNY Mellon Investment Management, and head of the ISSG.  "The recent equity market returns are helping corporations outperform their liabilities."

These returns also are helping public defined pension plans to meet or exceed return targets and endowments and foundations to meet or exceed their spending goals, according to the ISSG report for September.

The Boston Company Asset Management (TBC), the Boston-based equities investment boutique that is part of BNY Mellon, observed that rising investor confidence is driving the recent rallies in international stock markets.  Mark A. Bogar, managing director at TBC, said, "We've seen more widespread optimism as economic conditions, especially in continental Europe and Japan, have bottomed and begun to improve."

For September, the rise in equities contributed to the 3.1 percent increase in assets for the typical U.S. corporate pension plan, ISSG said.  Liabilities for these plans fell 0.2 percent, as the Aa corporate discount rate rose three basis points to 4.81 percent during the month, ISSG said.  Year to date, the funded ratio for corporate pension plans is up 13.9 percentage points, according to the BNY Mellon Institutional Scorecard.  

Plan liabilities are calculated using the yields of long-term investment grade bonds.  Higher yields on these bonds result in lower liabilities.

On the public side, the typical defined benefit plan in September posted a 3.4 percent excess return over its annualized 7.5 percent return target, ISSG said.  Public plan assets must earn at least 0.6 percent each month to keep pace with the 7.5 percent annual target. For the month, assets of the typical public plan outperformed those of corporate pension plans and foundations and endowments as a result of the public plan allocations to private equity, ISSG said.

Private equity, which comprises 10 percent of the typical public defined benefit plan, was one of the best performing asset classes in September, returning 9.0 percent, ISSG said.  Year to date, public plan assets are ahead of the return target by 3.8 percent.

For endowments and foundations, the net return over spending and inflation was 2.6 percent as plan assets increased 3.3 percent. Over the past 12 months, plan assets are up 10.7 percent beating the spending and inflation target by 4.4 percent.

Notes to Editors:

The BNY Mellon Investment Strategy and Solutions Group is a division of The Bank of New York Mellon.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of June 30, 2013, BNY Mellon had $26.2 trillion in assets under custody and/or administration, and $1.4 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on, or follow us on Twitter @BNYMellon.

All information source BNY Mellon as of June 30, 2013. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management to members of the financial press and media and the information contained herein should not be construed as investment advice.  Past performance is not a guide to future performance.  A BNY Mellon Company.



Mike Dunn

+1 212 922 7859