S&P 1500 Pension Funded Status Remained Level in February 

March 14, 2023 
United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies remained effectively level in February 2023 at 103 percent as a result of an increase in discount rates offset by a decrease in equity markets. As of February 28, 2023, the estimated aggregate surplus of $53 billion USD decreased by $1 billion USD as compared to a surplus of $54 billion USD measured at the end of January according to Mercer,1 a global consulting leader and a business of Marsh McLennan (NYSE: MMC).

The S&P 500 index decreased 2.61 percent and the MSCI EAFE index decreased 2.23 percent in February. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 4.77 percent to 5.21 percent.

“Pension funded status for the S&P 1500 remained level in February as discount rates bounced back to offset the decline in equity markets,” said Matt McDaniel, a Partner in Mercer’s Wealth Business. “Despite cooling inflation, rates increased during the month as January inflation was higher than expected and the labor market continues to be very strong, causing concern the Fed will be more bearish as the year goes on. Equity markets started off the year great in January but pulled back some during the month. With the current volatility of interest rates, the attractiveness of various pension risk transfer strategies could change rather quickly. Plan sponsors should monitor potential opportunities and may need to act quickly if the right market conditions arise.”

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 February 28, 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 January 31, 2022 was $1.82 trillion USD, compared with estimated aggregate liabilities of $1.77 trillion USD. Allowing for changes in financial markets through February 28, 2023, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of February the estimated aggregate assets were $1.72 trillion USD, compared with the estimated aggregate liabilities of $1.66 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, February 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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