Corporate Pension Plans’ Funding Status Woes Continue to Vacillate

Thanks to record low Aa corporate discount bond rates and declines in domestic and international stocks, U.S. corporate pension plans saw their funding status dip more than 5.6% to 71.3% in August, BNY Mellon Asset Management said.

Last month, the BNY Mellon Pension Summary Report explained that corporate plans saw a 2.9% jump to 76.9%, which at the time, resulted in a bump up from June’s funding status level of 74%. However, with August’s numbers, the previous gains proved to be an afterthought.

In a Sept. 8 announcement, BNY Mellon’s investment management arm said reasons for the 2.1% decline in assets and 5.5% increase in liabilities are due to the slumping global stock market, where U.S. equities and international stocks dropped 4.7% and 3.1%, respectively.

Alternately, to add, Aa corporate rates dropped from 5.29% to 4.29%, the lowest posting in “at least 30 years,” the press release said. 

“August was one of the worst months of 2010 for corporate pension plans as they were hit by sharply rising liabilities as well as declining assets," Peter Austin, executive director of BNY Mellon Asset Management’s pension services arm. "While corporate spreads increased, the dramatic decline in Treasury yields, reflecting a flight to quality, pushed nominal corporate interest rates to historic levels.”

Previously, back in March, pension plans posted their best funding status level since October 2008, where they hit an 88.1% plateau. To follow, corporate plans began to tumble in May and April.

As of June 30, BNY Mellon had more than $1 trillion in assets under management and $21.8 trillion in assets under custody and administration.