The funded status of the typical US corporate pension plan fell 2.6 percentage points to 87.3% in December as assets fell and liabilities increased, according to the BNY Mellon Investment Strategy and Solutions Group (ISSG).
Public defined benefit plans, endowments and foundations also lost ground during the month, ISSG said.
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For the typical corporate plan in December, assets decreased 0.4 percent as liabilities increased 2.5, according to the BNY Mellon Institutional Scorecard.
The funded status for the typical corporate plan finished 2014 down 7.9 percent from the December 2013 high of 95.2 percent, according to the scorecard.
Falling international and emerging markets equities accounted for the decline in assets at U.S. corporate plans and public plans, while the declines in private equity and commodities led to negative returns for foundations and endowments, ISSG said.
The higher liabilities for corporate plans in December resulted from the Aa corporate discount rate falling 14 basis points to 4.00 percent over the month. Plan liabilities are calculated using the yields of long-term investment grade bonds. Lower yields on these bonds result in higher liabilities.
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By GlobalData"The decline in interest rates, with the Aa corporate discount rate falling 93 basis points during the year, was the main driver for the fall in funded status during 2014," said Andrew D. Wozniak, head of fiduciary solutions, ISSG.
"Asset gains simply could not keep up with the rise in liabilities. The falling rates of 2014 erased almost all of the gains in funded status in 2013 that resulted from rising interest rates during that year."
Public defined benefit plans in December underperformed their targets by 1.8 percent as assets declined 1.2 percent, according to the monthly report. For the full year of 2014, public plans underperformed their return target by 3.0 percent, ISSG said.
For endowments and foundations, the real return in December was -1.8 percent, as assets declined 1.4 percent, ISSG said. For the year, endowments and foundations are behind their inflation plus spending target by 2.7 percent, ISSG said.
