Pension Funded Status at Highest Level Since August 2011

Five months of rallying equities led to recovery from September low

Pension funded status rose to more than 76% in February after five consecutive months of equities rallies, BNY Mellon reported on Friday. Pension plans also benefited from a slight rise in interest rates, resulting in lower liabilities.

"The equity markets have provided some relief to corporate pension plans for the last five months and we now are at our best funding levels since August 2011," Jeffrey Saef, managing director for BNY Mellon Asset Management and head of the BNY Mellon Investment Strategy & Solutions Group, said in a statement.

Corporate Pension Funded Status, 2011In August 2011, corporate pension funding status was 78%, before falling in September to 70%, its lowest level since BNY Mellon Asset Management began tracking this data in 2006.

So far in 2012, the typical corporate plan has increased 3.8 percentage points, according to BNY Mellon.

Assets in February rose 2.7%, while liabilities fell 0.2%. The decline in liabilities was due to a 3 basis point increase in the Aa corporate discount rate to 4.33 percent, according to BNY Mellon. Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Higher yields on these bonds result in lower liabilities.

"Corporate plans will need the rally in stocks to continue, a bump in interest rates, or a combination of these drivers to further close their funding gaps," Saef added.

In January, funded status for corporate pensions was at 74.1%. 

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