U.S. corporate pension funding ratios remained well above 100% at the end of September as investment returns continue to outpace rising liability values, according to two new reports.

First, Wilshire Advisors estimated the aggregate funding ratio of U.S. corporate plans reached 101.6% as of Sept. 30, an increase of 0.3 percentage points above the 101.3% funding ratio newly estimated by the firm as of Aug. 31.

“September’s funded status improved due to continued increases in asset values, with most asset classes posting positive returns during the month. The FT Wilshire 5000 Index recorded its fifth consecutive monthly increase, closing at an all-time high and rising more than 20% during the first three quarters of 2024,”said Ned McGuire, managing director at Wilshire, in an Oct. 2 news release.

“In September, the Federal Reserve began its rate-cutting campaign with a 50-basis-point reduction, with corporate bond yields, used to value corporate pension liabilities, declining for the fifth consecutive month totaling nearly 70 basis points over this period,” said McGuire.

“Despite the increase in liability values, U.S. corporate pension plans remain over 100% funded in aggregate, due to larger asset values increases.”

Wilshire’s assumed asset allocation is 32% long-duration fixed income, 28% core fixed income, 24% domestic equity, 14% international equity and 2% real estate.

In another monthly report, Legal & General Investment Management America estimated the average funding ratio of the typical U.S. corporate pension plan increased to 110% as of Sept. 30 from 109.9% a month earlier.

LGIMA’s Pension Solutions Monitor cited the MSCI ACWI Total Gross index and S&P 500 index returning 2.4% and 2.1%, respectively, during September.

The positive performance offset a rise in liabilities that LGIMA said was the result of a decrease in discount rates of 21 basis points in the month ended Sept. 30, driven by the Treasury component falling 17 basis points and the credit component tightening by 4 basis points.

The monitor assumes a typical liability profile using a duration of 12 years and an asset allocation of 50% MSCI ACWI index and 50% Bloomberg U.S. Long Government/Credit index.

LGIMA estimated that corporate plans with that profile would have seen asset values increase by 2.3 percentage points, offsetting a 2.3-percentage-point rise in liability values.

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