S&P 1500 Pension Funded Status Decreased by One Percent in July

S&P 1500 Pension Funded Status Decreased by One Percent in July

S&P 1500 Pension Funded Status Decreased by One Percent in July

  • August 6, 2019
  • United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies decreased by one percent in July 2019 to 86%, as a result of a decrease in discount rates. As of July 31, 2019, the estimated aggregate deficit of $322 billion USD increased by $14 billion USD as compared to $308 billion USD measured at the end of June according to Mercer,[1] a global consulting leader in advancing health, wealth and career, and a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC).

The S&P 500 index increased 1.44 percent and the MSCI EAFE index decreased 1.26 percent in July. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased from 3.44 percent to 3.38 percent.

“July was a relatively calm month for pensions with interest rates decreasing slightly and equity markets mixed,” said Scott Jarboe, a Partner in Mercer’s Wealth Business. “In late-July the S&P 500 reached an all-time high but meanwhile interest rates have now dropped to their lowest levels in three years. Plan sponsors should review their risk management toolkit to consider whether their investment policy is aligned with the current market environment and to explore potential risk transfer activity, such as a lump sum window, which may be attractive to pursue before 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 statement[2] and by projections to July 31, 2019 in line with financial indices. The estimates include US 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, 2019 was $2.03 trillion USD, compared with estimated aggregate liabilities of $2.33 trillion USD. Allowing for changes in financial markets through July 31, 2019, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of July the estimated aggregate assets were $2.03 trillion USD, compared with the estimated aggregate liabilities of $2.35 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 http://www.mercer.com/pensiondiscount.

The Mercer US Pension Buyout Index may be accessed at http://www.mercer.us/our-thinking/mercer-us-pension-buyout-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 surplus/ (deficit) position and the funded status of all plans sponsored by companies in the S&P 1500

Source: Mercer, July 2019

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


High Quality Corporate Bond Yield

S&P 500 Index

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Mercer delivers advice and technology-driven solutions that help organizations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan Companies (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people with 76,000 colleagues and annualized revenue approaching $17 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 www.mercer.com. Follow Mercer on Twitter @Mercer.

[1]Figures provided by Mercer Investment 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.