As assets have decreased, liabilities have increased. Last month, assets for the typical plan fell 2.1 percent while liabilities increased 5.5 percent, the group states.
"August was one of the worst months of 2010 for corporate pension plans as they were hit by sharply rising liabilities as well as declining assets," BNY executive director Peter Austin said in prepared remarks, adding that "since March, pension funds have had little to cheer about, as the funded status for the typical corporate plan has fallen more than 14 percentage points."
The Mellon report shows that U.S. equities have dropped 4.7 percent while international stocks have declined 3.1 percent. Meanwhile, this loss can not be made up in the bond market. The report states the Aa corporate discount rate dropped from 5.29 percent at the end of July to 4.92 percent at the end of August — the lowest level in at least 30 years.
Austin states that volatility in the marketplace has forced some pension managers to look at fixed income vehicles, which would benefit little from any upticks in the market.
He states that "many plan sponsors are loath" to this approach, but "there is a clear trend toward" toward this strategy to avoid the volatility.
The Mellon report comes as Washington begins to take a deeper look at the state of all pensions.
Labor groups are expected to be invited to the U.S. Chamber of Commerce to discuss the alarming shortfall that many pensions face in meeting liabilities. A handful of financial experts say the shortfall in state pensions alone could force a government bailout that could run as high as $3 trillion.