S&P 1500 Pension Funded Status Decreased by 1 Percent in August 

September 8, 2022 

United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies decreased by 1 percent in August 2022 to 101 percent as a result of a decrease in equity markets partially offset by an increase in discount rates. As of August 31, 2022, the estimated aggregate surplus of $23 billion USD decreased by $7 billion USD as compared to a surplus of $30 billion USD measured at the end of July according to Mercer,¹ a global consulting leader and a business of Marsh McLennan (NYSE: MMC).

The S&P 500 index decreased 4.24 percent and the MSCI EAFE index decreased 4.99 percent in August. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 4.35 percent to 4.70 percent.

“Pension funded status for the S&P 1500 fell one percent in August as equities stumbled to end the month,” said Matt McDaniel, a Partner in Mercer’s Wealth Business. “Equities pulled back in August and interest rates rose as expectations are the Fed will continue to raise rates despite slightly cooling inflation. As has happened much of the year, we continue to see rises in interest rates offsetting equity losses for many pension plans leading to level or increasing funded status. With recession fears lingering, plan sponsors may want to review their investment policy to evaluate de-risking opportunities as long duration fixed income is more attractive compared to recent history due to rises in yields.”

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 August 31, 2022 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 July 31, 2022 was $1.88 trillion USD, compared with estimated aggregate liabilities of $1.85 trillion USD. Allowing for changes in financial markets through August 31, 2022, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of August the estimated aggregate assets were $1.79 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 https://www.mercer.com/en_us/insights/retirement/defined-benefit-plans/pension-discount-yield-curve-and-index-rates-in-us.html.

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, July 2022

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

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_{¹ Figures provided by Mercer Investments LLC.}

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