Administration August 14, 2013

Pensions Continue Lowering Assumptions

August 14, 2013 (PLANSPONSOR.com) – Pension plans in the U.S. continue to lower assumptions, according to an analysis from PwC.
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PwC analyzed 100 companies, comprising Fortune 100 and other large and established companies, with a December 31 measurement date, and found the 2012 median discount rate decreased 75 basis points since 2011 and 225 basis points since 2007. The 2012 median expected long-term rate of return on pension plan assets decreased 25 basis points since 2011 and 55 basis points since 2007.

Median plan funding levels remained constant from 2011 to 2012, with pension plan assets equal to approximately 77% of the projected benefit obligation (PBO) at the end of both years. By comparison, in 2007 the median funding percentage was 100%.

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Median deferred losses for pension also remained constant at 37% of the projected benefit obligation at the end of 2012 and at the end of 2011. In 2007, deferred losses were only 12% of the PBO.

Median asset allocations remained relatively constant at 46% equity, 37% debt/fixed income and 15% other in 2012, compared with 45% equity, 35% debt/fixed income and 6% other in 2011. In 2007, however, the median values were 64% equity, 29% debt/fixed income and 6% other.

PwC also analyzed corporations’ other post-employment benefits (OPEB) obligations, and found the 2012 median discount rate decreased 71 basis points since 2011 and 236 basis points since 2007. OPEB plan funding has changed slightly with 48% of plans being funded in 2012, compared with 50% of plans being funded in 2011 and 53% being funded in 2007.

A full report of the analysis can be downloaded from here.

Administration August 14, 2013

Master Trust Returns Essentially Flat for 2Q13

August 14, 2013 (PLANSPONSOR.com) – The median return of the BNY Mellon U.S. Master Trust Universe for the second quarter of 2013 was down slightly at -0.05%.
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This is the first negative result since the second quarter of 2012. For the 12 months ending June 30, the median plan returned 11.59%.

“Performance for all plan types within the Universe were relatively flat for the second quarter, as gains in U.S. equities and real estate were offset by losses in other asset classes,” said John Gruber, head of product strategy for BNY Mellon’s Global Risk Solutions group. “Endowments were the best performing segment, with higher allocations to alternatives and real estate, while corporate plans were the lowest performing segment, having the highest allocation to fixed income.”

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BNY Mellon also found that:

  • Forty-seven percent of plans in the BNY Mellon Master Trust Universe returned positive results during the quarter. Over the prior 12-month period, 99% of plans were in the black;
  • Thirty-six percent of plans matched or outperformed the custom policy return for the second quarter. For the full year, 21% of plans outperformed the custom policy;
  • Endowments recorded the highest median return for the quarter at 0.37%, followed by foundations at 0.20%.; and
  • U.S. equities posted a quarterly median return of 2.85%, versus the Russell 3000 Index return of 2.69%. Non-U.S. equities posted a median return of -2.00%, behind the Russell Developed ex U.S. Large Cap Index result of -1.23%. U.S. fixed income had a median return of -2.88%, versus the Barclays Capital U.S. Aggregate Bond Index return of -2.32%. Non-U.S. fixed income posted a median return of -3.84%, compared with the Citigroup Non-U.S. World Government Bond Index return of -3.44%. Real estate posted a median return of 2.76%, versus the NCREIF Property Index result of 2.87%.

The average asset allocation in the BNY Mellon U.S. Master Trust Universe for the second quarter was: U.S. equity 28%, U.S. fixed income 26%, non-U.S. equity 17%, non-U.S. fixed income 1%, real estate 3%, cash 1% and alternatives/other 24%.

With a market value of more than $2.2 trillion and an average plan size of $3.6 billion, the BNY Mellon U.S. Master Trust Universe is a fund-level tracking service that can be used to make peer comparisons of both performance and asset allocation results. The Universe consists of 619 corporate, foundation, endowment, public, Taft-Hartley and health care plans.

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