Rising equity markets and falling liabilities in December pushed the funded status of the typical U.S. corporate pension plan into positive territory in 2012, according to BNY Mellon Investment Strategies & Solutions Group.
The funded status for the typical plan increased 1.9 percentage points to 76.3 percent in December. For the year, the funded status was up 1 percentage point, according to the BNY Mellon Pension Summary Report for December 2012.
Assets for the typical plan in December rose 0.9 percent as equities markets climbed. Liabilities fell 1.7 percent as the Aa corporate discount rate rose 13 basis points to 3.89 percent, 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.
"Plans benefited over the last six months as the discount rate has been slowly rising, leading to a decrease in liabilities," said Jeffrey Saef, managing director of BNY Mellon Investment Management, and head of the ISSG. "At the same time, equities held on to the gains achieved earlier in the year, leading to the positive performance for all of 2012."
BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets.