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 One 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 one percent in April 2018 to 88% 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 $254 billion USD decreased by $32 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 0.3 percent and the MSCI EAFE index increased 1.9 percent in April. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased by 17 basis points to 4.09 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 glide paths in place, conditions support systematic de-risking to lock in gains, while we expect others 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 $2.19 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

4.09%

2,648.05


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 22,000 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, through its market-leading companies 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.

 

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