Administration July 6, 2015

Bond Yields Boost Pension Funded Status in June

The increase in funding was the result of a larger decrease in liability values compared to the decrease in asset values.
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The aggregate funded ratio for U.S. corporate pension plans increased to 86.2% for the month of June, according to Wilshire Consulting.

“We estimate that overall the funded ratio for the plan sample increased by 0.6% from 85.6% in May to 86.2% in June,” stated Ned McGuire, vice president and member of the Pension Risk Solutions Group of Wilshire Consulting. “The improvement in funding levels was driven by a 3.5% decrease in liability values versus a 2.8% decrease in asset values. The asset result is due to negative returns for most asset classes, while liability values fell due to an increase in corporate bond yields.”                

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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 2015 corporate funding study. The most current month end liability growth is estimated using the Barclays Long Aa+ U.S. Corporate Index.

The assumed asset allocation is:

  • U.S. Equity – 32%;
  • Non-U.S. Equity – 21%;
  • Core Fixed Income – 18%;
  • Long Duration Fixed Income – 27%;
  • Real Estate – 2%.

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