S&P 1500 Pension Funded Status Increased by 2 Percent in July 

August 4, 2023 
United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 2 percent in July 2023 to 107 percent as a result of an increase in equity markets and an increase in discount rates. As of July 31, 2023, the estimated aggregate surplus of $119 billion USD increased by $34 billion USD as compared to a surplus of $85 billion USD measured at the end of June according to Mercer,  a global consulting leader and a business of Marsh McLennan (NYSE: MMC).

The S&P 500 index increased 3.11 percent and the MSCI EAFE index increased 3.17 percent in July. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 5.13 percent to 5.19 percent.

“Pension funded status for the S&P 1500 continued to climb in July as equity markets are now closing in on their early 2022 levels,” said Matt McDaniel, a Partner in Mercer’s Wealth Business. “Pension funded status increased two percent in July as equities continued their latest bull run. Inflation continued to fall through the end of June and while the Fed opted for another quarter percentage point hike in July, future rate hikes appear to be in question as the Fed continues to evaluate the market on a month-to-month basis. Pension funded status levels continue to push towards all-time highs and plan sponsors should continue to consider at what point it makes sense for their plans to de-risk or transfer risk in order to take advantage of some of the gains we’ve seen over the past couple of years.” 

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 statement  and by projections to July 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 June 30, 2023 was $1.78 trillion USD, compared with estimated aggregate liabilities of $1.70 trillion USD. Allowing for changes in financial markets through July 31, 2023, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of July the estimated aggregate assets were $1.80 trillion USD, compared with the estimated aggregate liabilities of $1.68 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 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.}

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