Corporate pension plans didn't see much good news in the month of April.
According to Wilshire Consulting, U.S. corporate pension plans' aggregate funded status fell by 0.1%, ending the month at 77.8% and bringing its year-to-date decline to 3.6%. The monthly change in funding, Wilshire said, was the result of offsetting increases in asset and liability values, while the year-to-date decrease was attributed to increasing liability values.
S&P 1500 companies saw a bigger drop, according to consultant Mercer, falling by one percent to hit 78% as of April 30. Mercer added that as of April 30, the estimated aggregate deficit of $504 billion rose by $12 billion, compared with the end of March. Funded status, it added, is now down by $100 billion from the $404 billion deficit measured at the end of 2015.
Recommended For You
Under PBGC's proposed new rule, pension premium payment penalties would be reduced by half.
"With the exception of real estate, April saw positive returns for all asset classes," Ned McGuire, vice president and member of the Pension Risk Solutions Group of Wilshire Consulting, said in a statement.
McGuire added, "The Wilshire 5000 Total Market Index gained slightly during the month, reaching a year-to-date high on April 20 before falling back to beginning-of-month levels. Narrowing credit spreads more than offset a rise in Treasury rates to push corporate bond yields used to value pension liabilities lower. These lower discount rates led to the increase in liability values."
Mercer said that there were April gains in the S&P 500 index of 0.3%, and 2.5% in the MSCI EAFE index, while typical discount rates for pension plans as measured by the Mercer Yield Curve fell by seven basis points to 3.73%.
"After a rough first quarter of 2016, April continued the trend of declining funded status," Matt McDaniel, a partner in Mercer's retirement business, said in a statement.
McDaniel added, "Long-term interest rates continue to fall in spite of the Fed's rate hike last year. However, this presents some compelling savings opportunities for plan sponsors making lump-sum payouts. With rates down 50 basis points from last fall, plans paying lump sums in 2016 can book gains when using the IRS-prescribed rates. However, this window of opportunity is closing, and plan sponsors will need to move quickly to take advantage."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
