U.S. Corporate pension plans’ funded status dropped by 3.8% in January to 79.7%, BNY Mellon reported Monday.
The S&P pension deficit of companies with defined benefit plans was also estimated to have increased by $83 billion to $411 billion over the month as assets fell to $1.6 trillion, and liabilities rose to more than $2 trillion, according to the BNY Mellon Institutional Scorecard.
Despite asset returns of -5.2% over the past year, the typical U.S. corporate pension plan’s funded status has increased by two percentage points over the last 12 months, up from 77.7%.
“Plan sponsors are beginning to lose their patience with the onslaught of negative news surrounding their pension plans,” Andrew Wozniak, head of BNY Mellon Fiduciary Solutions, said in a statement.
“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.”
Both public defined benefit plans and foundations and endowments also performed poorly in January, failing to meet the Scorecard’s monthly return targets by 4.2% and 4%, respectively. Assets dropped by 3.6% for both investor types.
Public DB plans got a boost from global fixed income, but were hurt by allocations to small cap and private equity, which lost 8.8% and 7.7%.
The typical public DB plan is now 12.6% behind its one-year return target as assets have, in total, dropped by 5.1% over that time period.
Foundations and endowments, too, fell short of their annual return target, by 12%, despite modest inflation over the past year.
In January, performance took hits from losses in emerging equity, down 6.5%, and REITs, down 3.1%.
“The rally we saw in late December was short-lived, as markets took a sharp drawdown in early and mid-January,” Wozniak said. “Of the asset classes our Scorecard tracks, only global fixed income, up 0.9%, and long gov/credit, up 2.1%, 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.”
BNY Mellon noted that the funded status of the typical U.S. corporate pension plans has now decreased for three months in a row, and for the third consecutive month public defined benefit plans and foundations and endowments have failed to meet their monthly return targets.
— Check out Institutional Plan Investments Regain Traction in Q4 on ThinkAdvisor.