S&P 1500 Pension Funded Status Increased by 7 Percent in October 

November 10, 2022 

United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 7 percent in October 2022 to 109 percent as a result of an increase in equity markets and an increase in discount rates. As of October 31, 2022, the estimated aggregate surplus of $133 billion USD increased by $104 billion USD as compared to a surplus of $29 billion USD measured at the end of September according to Mercer¹, a global consulting leader and a business of Marsh McLennan (NYSE: MMC).

The S&P 500 index increased 7.99 percent and the MSCI EAFE index increased 5.33 percent in October. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 5.41 percent to 5.73 percent.

“Pension funded status for the S&P 1500 skyrocketed by 7% in October, the largest single month increase since March 2009,” said Matt McDaniel, a Partner in Mercer’s Wealth Business. “Discount rates continued their upward march while equity markets had a sharp recovery, leading to a surge in funded status. This puts aggregate funded status at 109%, the highest level it has been since we began formally tracking it in 2006.  Many plan sponsors are looking at their highest funded status since the late 1990s, so the question becomes what to do now? Further de-risking investments, pension risk transfer, and even full plan termination are all on the table for many. It becomes clearer that inaction may not be an option, unless sponsors want to risk losing the hard-fought gains of the last 2+ 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 October 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 September 30, 2022 was $1.64 trillion USD, compared with estimated aggregate liabilities of $1.61 trillion USD. Allowing for changes in financial markets through October 31, 2022, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of October the estimated aggregate assets were $1.66 trillion USD, compared with the estimated aggregate liabilities of $1.52 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, October 2022

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 86,000 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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