Corporate Pension Plan Assets Plummeted in May, BNY Reports

The falling stock markets resulted in a decline of 4.8% in assets at the typical U.S. corporate plan, while liabilities were little changed in May, rising 0.3%, as reported by the BNY Mellon Pension Summary Report for May 2010. As BNY explains, plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities.

Austin added that the May 6 U. S. market flash crash “reminds us that the equity markets remain very sensitive. Continuing fears over the European sovereign debt crisis and the fragility of the global economic recovery are likely to result in increased market volatility for the near term. In response to this expected volatility, we are hearing from a growing number of corporations that are seeking new solutions to manage financial risks posed by their pension plans. There appears to be growing interest for funding strategies that seek to establish deadlines to achieve and maintain specific funding levels, with the goal of providing a buffer against wide swings in either the equity markets or in interest rates.”