S&P 1500 Pension Funded Status Increased by Two Percent in April

S&P 1500 Pension Funded Status Increased by Two Percent in April

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S&P 1500 Pension Funded Status Increased by Two Percent in April

  • May 4, 2018
  • United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by two percent in April 2018 to 89% at the end of the month, as a result of rising discount rates and gains in the equity markets. As of April 30, 2018, the estimated aggregate deficit of $242 billion USD decreased by $44 billion USD as compared to the $286 billion USD measured at the end of March 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 1.0 percent and the MSCI EAFE index increased 1.5 percent in April. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased by 21 basis points to 4.13 percent. 

“April was friendly to pension plans with both favorable equity markets and increasing discount rates.” said Scott Jarboe, a Partner in Mercer’s Wealth business. “For those sponsors with glidepaths in place, conditions support systematic de-risking to lock in gains, while we expect other are reviewing whether this is the tipping point for additional de-risking and risk transfer”                                         

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 April 30, 2018 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 March 31, 2018 was $1.95 trillion USD, compared with estimated aggregate liabilities of $2.23 trillion USD. Allowing for changes in financial markets through April 30, 2018, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of April the estimated aggregate assets were $1.93 trillion USD, compared with the estimated aggregate liabilities of $2.18 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, April 2018 

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

Date

High Quality Corporate Bond Yield

S&P 500 Index

December 31, 2007

6.40%

1,468.36

June 30, 2008

6.97%

1,280.00

December 31, 2008

6.34%

903.25

June 30, 2009

6.79%

919.32

December 31, 2009

5.98%

1,115.10

June 30, 2010

5.33%

1,030.71

December 31, 2010

5.33%

1,257.64

June 30, 2011

5.40%

1,320.64

December 31, 2011

4.55%

1,257.60

June 30, 2012

3.87%

1,362.16

December 31, 2012

3.71%

1,426.19

June 30, 2013

4.49%

1,606.28

December 31, 2013

4.69%

1,848.36

June 30, 2014

4.07%

1,960.23

December 31, 2014

3.81%

2,058.90

June 30, 2015

4.28%

2,063.11

December 31, 2015

4.24%

2,043.94

June 30, 2016

3.47%

2,098.86

December 31, 2016

4.04%

2,238.83

June 30, 2017

3.78%

2,423.41

December 31, 2017

3.56%

2,673.61

January 31, 2018

3.74%

2,823.81

February 28, 2018

3.97%

2,713.83

March 31, 2018

3.92%

2,640.87

April 30, 2018

4.13%

2,666.94

 

About Mercer

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 23,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With nearly 65,000 colleagues and annual revenue over $14 billion, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. Marsh & McLennan Companies is also the parent company of Marsh,which advises individual and commercial clients of all sizes on insurance broking and innovative risk management solutions;Guy Carpenter, which develops advanced risk, reinsurance and capital strategies that help clients grow profitably and pursue emerging opportunities; and Oliver Wyman, which serves as a critical strategic, economic and brand advisor to private sector and governmental clients. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.

[1]Figures provided by Mercer Investment Consulting 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. 

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