The funded status of the typical US pension plan declined 3.3 percentage points on a “reporting basis” in January, entirely due to a drop in the global equity markets, according to BNY Mellon Asset Management.
The “reporting basis” is designed to track the new funding rules adopted by the US Treasury Department and financial reporting guidelines implemented in 2007 by the Financial Accounting Standards Board.
“The fear of slowing economies and rising inflation produced the worst monthly stock market drop in five years, causing the value of the assets held in pension plans to decline. However, long-maturity US Treasury bond yields were only six basis points lower, which held the liabilities of these plans essentially flat,” says Peter Austin, executive director, BNY Mellon Asset Management.