The typical U.S. corporate pension plan saw its funded status decline in September, for the third consecutive month.
According to BNY Mellon Fiduciary Solutions, corporate plans’ funded status fell by 2.4 percentage points to 81.8 percent.
This latest loss means that those plans are now down for the year to date, according to BNY Mellon. In addition, declining asset values meant that public plans, foundations, and endowments also failed to meet their targets.
The typical U.S. corporate plan saw its funded status peak at 85.5 percent on September 16, before falling 3.7 percent in the second half of the month. That drop was driven by an overall 1.9 percent decline in assets since August.
In the meantime, liabilities rose by 1.1 percent as the Aa Corporate discount rate fell by six basis points.
Since plan liabilities are calculated using the yields of long-term investment grade bonds, when those bonds see lower yields, plans see higher liabilities.
September was a rough month for public defined benefit plans, too.
They missed their return target by 2.8 percent, according to the September BNY Mellon Institutional Scorecard, because assets fell by 2.2 percent.
Public plans are behind on year-to-date and one-year return targets by 9.4 percent and 10.1 percent, respectively.
The scorecard also found that endowments and foundations missed their targets of spending plus inflation by 2.8 percent.
The monthly report said that asset returns for the typical endowment and foundation fell 3.5 percent over the past year; that’s behind the spending-plus-inflation target by 8.6 percent.
“Corporate defined benefit plan sponsors felt the combined effects of both declining asset values and increasing liabilities, which led to funded status declines for the typical plan,” said Andrew D. Wozniak, head of BNY Mellon Fiduciary Solutions, in a statement.
Wozniak added, “High-yield securities and equities continued to struggle, leading to the decline in asset values that hit typical public defined benefit plans, endowments and foundations. Fixed-income ex-high yield and REITs were the exception, performing well over the month as investors moved away from risk.”
The situation may not improve in what’s left of the year, either, at least for corporate plans.
A PwC analysis of the 100 largest such plans found that plans were weighed down by major decreases in interest rates from 2013 to 2014, as well as the adoption of updated mortality tables with more conservative mortality assumptions. That’s put plans behind even before they set foot in the market, which hasn’t been kind to plans trying to make up lost ground.