Funded Status of U.S. Corporate Pensions Hits Highest Level in Nearly Two Years

The funded status of the typical U.S. corporate pension plan rose 5.6 percentage points in May this year to 86.4%, the highest level since July 2011, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG). The funded ratio is up 10.1 percentage points from a year before, ISSG said.

The improvement was driven by a jump in the AA corporate discount rate, which drove liabilities sharply lower, according to the BNY Mellon Pension Summary Report for May 2013. Liabilities for the typical corporate plan fell 6.3% as the discount rate on the AA corporate bonds increased 43 basis points to 3.1%, the sharpest rise in nearly two years, the report said. Plan liabilities are calculated using the yields of long-term investment-grade bonds. Higher yields on these bonds result in lower liabilities.

Assets for the typical corporate plan increased 0.2% as U.S. equity markets rose, the report said.