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

July 11, 2023 

United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 2 percent in June 2023 to 105 percent as a result of an increase in equity markets partially offset by a small decrease in discount rates. As of June 30, 2023, the estimated aggregate surplus of $85 billion USD reflects an increase of $34 billion USD as compared to a surplus of $51 billion USD measured at the end of May according to Mercer¹, a global consulting leader and a business of Marsh McLennan (NYSE: MMC).

The S&P 500 index increased 6.47 percent and the MSCI EAFE index increased 4.40 percent in June. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased from 5.15 percent to 5.13 percent.

“Pension funded status for the S&P 1500 rose in June on the back of surging equity markets,” said Scott Jarboe, a Partner in Mercer’s Wealth Business. “Pension funded status increased two percent in June as equities charged ahead on the suspension of the domestic debt ceiling until 2025. Interest rates remained relatively flat over the month as inflation continues to slowly fall and the Fed held rates steady for now at their June meeting. Pension funded status levels remain very healthy but there is considerable uncertainty in the markets with investors keeping a close eye on what the Fed does the remainder of the year. According to results from Mercer's survey of CFOs released this month, many plan sponsors are accelerating risk transfer decisions, but plan sponsors should be assessing if now is the right time 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 statement² and by projections to June 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 May 31, 2023 was $1.74 trillion USD, compared with estimated aggregate liabilities of $1.69 trillion USD. Allowing for changes in financial markets through June 30, 2023, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of June the estimated aggregate assets were $1.78 trillion USD, compared with the estimated aggregate liabilities of $1.70 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, June 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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