S&P 1500 Pension Funded Status Decreased by 2 Percent in January 

February 9, 2023 

United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies decreased by 2 percent in January 2023 to 103 percent as a result of a decrease in discount rates partially offset by an increase in equity markets. As of January 31, 2022, the estimated aggregate surplus of $54 billion USD decreased by $22 billion USD as compared to a surplus of $77 billion USD measured at the end of December according to Mercer,¹ a global consulting leader and a business of Marsh McLennan (NYSE: MMC).

The S&P 500 index increased 6.18 percent and the MSCI EAFE index increased 8.05 percent in December. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased from 5.24 percent to 4.77 percent.

“Pension funded status for the S&P 1500 fell two percent in January as plummeting discount rates offset a strong start to 2023 for equity markets,” said Scott Jarboe, a Partner in Mercer’s Wealth Business. “Equities increased on continuing signs that inflation may be slowing and in anticipation the Fed may continue to slow interest rate hikes. However, discount rates fell around 50 bps in January, increasing liabilities significantly resulting in a net drop in funded status. With funded status continuing to decrease, plan sponsors may see the window of opportunity fading on some de-risking and risk transfer opportunities. However, certain risk transfer strategies, such as lump sum windows, may be more attractive now that rates have dropped significantly since late last year.”

Mercer estimates the aggregate funded status position of plans sponsored by S&P 1500 companies on a monthly basis. Figure 1 (below) 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 latest available year-end statement² and by projections to January 31, 2023 in line with financial indices. The estimates include U.S. domestic qualified and non-qualified plans, along with all non-domestic plans. The estimated aggregate value of pension plan assets of the S&P 1500 companies as of December 31, 2022 was $1.73 trillion USD, compared with estimated aggregate liabilities of $1.65 trillion USD. Allowing for changes in financial markets through January 31, 2023, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of January the estimated aggregate assets were $1.82 trillion USD, compared with the estimated aggregate liabilities of $1.77 trillion USD. Figure 2 shows the discount rates used in Mercer’s pension funding calculation.

Notes for editors

Information on the Mercer Yield Curve is available at http://www.mercer.com/pensiondiscount.

The Mercer US Pension Buyout Index may be accessed at https://www.mercer.com/en-us/insights/investments/market-outlook-and-trends/pension-buy-out-index.html.

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 funded status of all plans sponsored by companies in the S&P 1500

Source: Mercer, January 2023

Figure 2: High Quality Corporate Bond Yield and S&P 500 data points

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 85,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter.

_{¹ Figures provided by Mercer Investments LLC.}

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