The aggregate funded ratio for US corporate pension plans increased by 3.3 percentage points to end the month of November at 80.6 percent, nearly eliminating its year-to-date decline to 0.8 percentage points, according to Wilshire Consulting.
The monthly change in funding resulted from a 5.2 per cent drop in liability values significantly offsetting the 1.2 per cent decrease in asset values.
This narrowed the year-to-date decline in funding ratios, which has been driven by a nearly 6 per cent increase in liability values.
“Despite positive US equity returns, asset values fell due to negative returns for most other asset classes during the month. The fall in asset values was more than offset by the fall in liability values resulting from the nearly 40 basis point rise in long corporate bond yields during the month. This is the fifth consecutive month of either flat or rising funded ratios, and this month’s increase is the largest in the past 12 months,” says Ned McGuire (pictured), vice president and a member of the pension risk solutions group of Wilshire Consulting.
“The post-election, Trump-bounce in corporate funding ratios was driven by a more than 4.5 per cent increase in the Wilshire 5000 Total Market Index during the month and rising corporate bond yields, which pushed liability values lower for the fourth consecutive month.”
The aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration in-line with the Citi Group Pension Liability Index – Intermediate. The Funded Ratio is based on the CPLI – Intermediate liability, with service cost, benefit payments and contributions in-line with Wilshire’s 2016 corporate funding study.
The most current month end liability growth is estimated using the Barclays Long Aa+ US Corporate Index.
