S&P 1500 Pension Funded Status Gains in 2015 Wiped Out by January Declines

  • February 3, 2016
  • United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies decreased by 3 percent to 79 percent as of January 31, 2016, as a result of negative equity markets and a decrease in rates. As of January 31, 2016, the estimated aggregate deficit of $472 billion USD increased by $68 billion as compared to the $404 billion USD deficit measured at the end of 2015, according to Mercer,[1] a global consulting leader in advancing health, wealth and careers of individuals, and a wholly-owned subsidiary of Marsh & McLennan Companies (NYSE: MMC).

The S&P 500 index dropped 5.1 percent and the MSCI EAFE index dropped 7.3 percent in January. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased to 4.13 percent.

“In just one month of 2016, we have seen the entire improvement in funded status for 2015 disappear,” said Jim Ritchie, a Principal in Mercer’s Retirement Business. “2015 may have been the end of the latest bull market, causing a great deal of stress on corporate pension plans. While many plan sponsors have taken steps to de-risk their pension plans, 2016 will be a test on how much risk pension plans still retain. We recommend that plan sponsors have a sense of urgency to stress test their pension plans against equity losses and adjust their asset allocation strategy accordingly. While many believe interest rates will rise and help improve the funded status of pension plans, the recent action by the Federal Reserve was arguably already priced into long term rates and has in fact not prevented further reduction in yields, as investors make a flight to long term fixed income.”

Mercer estimates the aggregate funded status position of plans sponsored by S&P 1500 companies on a monthly basis. Figure 1 (page 3) shows the estimated aggregate surplus/(deficit) position and the funded status of all plans sponsored by companies in the S&P 1500. The estimates are based on each company’s year-end statement[2] and by projections to January 31, 2016 in line with financial indices. The estimates include US domestic qualified and non-qualified plans and all non-domestic plans. The estimated aggregate value of pension plan assets of the S&P 1500 companies as of December 31, 2015, was $1.80 trillion USD, compared with estimated aggregate liabilities of $2.20 trillion USD. Allowing for changes in financial markets through January 31, 2016, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of January the estimated aggregate assets were $1.75 trillion USD, compared with the estimated aggregate liabilities of $2.22 trillion USD. Figure 2 shows the interest rates used in Mercer’s pension funding calculation.

Notes for editors

Information on the Mercer Yield Curve is available at .

The Mercer US Pension Buyout Index may be accessed at

Unless otherwise stated, the calculations are based on the Financial Accounting Standard (FAS) funding position and include analysis of the S&P 1500 companies.

Figure 1 : Estimated aggregate surplus/(deficit) position and the funded status of all plans sponsored by companies in the S&P 1500



Source: Mercer, January 2016

See Figure 2 for High Quality Corporate Bond Yield and S&P 500 data points.

Figure 2: Sample Data Points:


High Quality Corporate Bond Yield[3]

S&P 500 Index[4]

December 31, 2007



June 30, 2008



December 31, 2008



June 30, 2009



December 31, 2009



June 30, 2010



December 31, 2010



June 30, 2011



December 31, 2011



June 30, 2012



December 31, 2012



June 30, 2013



December 31, 2013



June 30, 2014



December 31, 2014



March 31, 2015



June 30, 2015



September 30, 2015



December 31, 2015



January 31, 2016



About Mercer

Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and careers of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries.  Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With annual revenue of $13 billion and 57,000 colleagues worldwide, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit Follow Mercer on Twitter @Mercer.

Mercer Investment Consulting, LLC is a federally registered investment adviser under the Investment Advisers Act of 1940, as amended, providing nondiscretionary and discretionary investment advice to its clients on an individual basis. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Mercer’s Form ADV Part 2A & 2B can be obtained by written request directed to:  Compliance Department, Mercer Investments, 701 Market Street, Suite 1100, St. Louis, MO  63011.

[1]Figures provided by Mercer Investment Consulting, LLC.

[2]Source of financial statement data: Standard & Poor’s Capital IQ. Standard and Poor’s is a division of The McGraw-Hill Companies, Inc. This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s.  Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party.  Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content.  THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of THEIR CONTENT, INCLUDING ratings. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold, or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.

[3]Assumed duration of approximately 12 years. Based on an estimate of the Mercer Yield Curve Mature Plan Index rate.

[4]Includes price changes only; total returns also include dividends.