US corporate pension plans saw a 0.9% decrease in the average funded ratio at the end of August, bringing it to 83.2%, according to research by Wilshire Consulting found. This is up 7.3% over the past 12 months.
The change for the month is a result of a 1.8% increase in liability values, partially offset by a 0.7% increase in asset values. The aggregate funded ratio is still relatively flat quarter-to-date, and up 1.3% year-to-date.
“August marks the fourth month of declines in funded ratios both year-to-date and in the past five months,” stated Ned McGuire, managing director and a member of the Pension Risk Solutions Group of Wilshire Consulting. “August’s funding decrease was driven by the increase in liability values resulting from a decline in corporate bond yields used to measure pension liabilities. The decrease in funding comes despite a 10th consecutive month of gains for the Wilshire 5000 Total Market Index, its longest such streak in more than 20 years.”
The 12-month review of the funded ratio can be viewed below:
According to Wilshire Consulting, 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 recent month–end liability growth is estimated using the Barclays Long Aa+ US Corporate Index.
The assumed asset allocation can be viewed below: