The funded status of the typical U.S. corporate pension plan fell 3.5 percentage points in April to 76.3 percent, the first time this percentage has declined in 2012, according to BNY Mellon Asset Management.
The drop came as a result of a 4.5 percent rise in liabilities, resulting from falling interest rates and a decline in the equity markets, according to BNY's Pension Summary Report for April.
BNY attributed the increase in liabilities to the 29-basis-point drop in the Aa corporate discount rate to 4.29 percent. The decline in the equity markets was the primary reason for the 0.1 percent drop in plan assets during the month, the report said.
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The funded status of corporate pensions is still positive for the year, according to the report, having gained 3.9 percentage points, primarily as a result of the strong equities performance in the first quarter of 2012.
"Concerns about a slowing economy in the U.S. and the ability of Europe to rebound resulted in increased pessimism in April," said Jeffrey B. Saef, managing director, BNY Mellon Asset Management, and head of the BNY Mellon Investment Strategy & Solutions Group (a division of The Bank of New York Mellon). "If plan sponsors become pessimistic about the outlook for equities, we could see further acceleration in the trend toward hedging against interest rate moves."
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets. It operates in 36 countries and serves more than 100 markets.
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