S&P 1500 Pension Funded Status Increased 1 Percent in September 

October 11, 2023 
United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 1 percent in September 2023 to 109 percent as a result of an increase in discount rates partially offset by a decrease in equity markets. As of September 30, 2023, the estimated aggregate surplus of $142 billion USD increased by $9 billion USD as compared to a surplus of $133 billion USD measured at the end of August according to Mercer,¹ a global consulting leader and a business of Marsh McLennan (NYSE: MMC).

The S&P 500 index decreased 4.87 percent and the MSCI EAFE index decreased 3.69 percent in September. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 5.37 percent to 5.84 percent.

“Pension funded status for the S&P 1500 rose one percent in September as interest rates rose sharply, more than offsetting another month of retracting equity markets,” said Matt McDaniel, a Partner in Mercer’s Wealth Business. “Pension funded status rose in September to 109%, equaling the high water mark set last October, on the back of interest rates that have risen to 13-year highs. We have seen an unprecedented wave of risk transfer as many plans have reached higher funded levels. It is unclear if these funded levels are the new normal or transient but plan sponsors that have waited to act may want to take a serious look at their plan’s position as we approach the end of the 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 September 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 August 31, 2023, was $1.76 trillion USD, compared with estimated aggregate liabilities of $1.63 trillion USD. Allowing for changes in financial markets through September 30, 2023, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of September the estimated aggregate assets were $1.67 trillion USD, compared with the estimated aggregate liabilities of $1.53 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, September 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 more than 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.}

_{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.}