S&P 1500 Pension Funded Status Remained Level in April 

May 5, 2023 
United States, New York

 

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies remained effectively level in April 2023 at 102 percent as a result of a decrease in discount rates offset by an increase in equity markets. As of April 30, 2023, the estimated aggregate surplus of $29 billion USD increased by $1 billion USD as compared to a surplus of $28 billion USD measured at the end of March according to Mercer,1 a global consulting leader and a business of Marsh McLennan (NYSE: MMC).

 

The S&P 500 index increased 1.46 percent and the MSCI EAFE index increased 2.45 percent in April. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased from 4.93 percent to 4.88 percent.

 

“Pension funded status for the S&P 1500 remained effectively level in April as discount rates fell slightly offsetting improvements in equity markets,” said Matt McDaniel, a Partner in Mercer’s Wealth Business. “April was a relatively quiet month for pension funded status as reports continue to show broad inflation has cooled but continues to remain above long-term expectations.”

 

“While pension funded status has fallen from the peak late last year, funded levels are still very healthy and we continue to see a lot of activity in the risk transfer space. With the decrease in rates year to date, lump sum windows may be the lowest hanging fruit for some plan sponsors, but time may be quickly running out to capitalize.” 

  

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 April 30, 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 March 31, 2023, was $1.78 trillion USD, compared with estimated aggregate liabilities of $1.75 trillion USD. Allowing for changes in financial markets through April 30, 2023, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of April the estimated aggregate assets were $1.79 trillion USD, compared with the estimated aggregate liabilities of $1.76 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 http://www.mercer.us/our-thinking/mercer-us-pension-buyout-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, April 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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