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


New York, N.Y., September 3, 2021
– The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 2 percent in August 2021 to 95 percent as a result of an increase in discount rates and equity markets. As of August 31, 2021, the estimated aggregate deficit of $133 billion USD decreased by $45 billion USD as compared to a deficit of $178 billion USD measured at the end of July according to Mercer1, a global consulting leader and a business of Marsh & McLennan (NYSE: MMC).

 

The S&P 500 index increased 2.90 percent and the MSCI EAFE index increased 1.52 percent in August. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 2.51 percent to 2.58 percent.

 

“Funded status increased for the first time in several months as interest rates reversed their downward trend and inched upward in August,” said Matt McDaniel, a Partner in Mercer’s Wealth Business. “Equities continued their strong performance despite a significant rise in COVID-19 cases across the country. As we approach the fourth quarter of the year, some may be wondering when/if an equity sell-off may occur. In light of funded status improvements this year, plan sponsors should evaluate their current position to ensure they are appropriately protected.”

 

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 August 31, 2021 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 June 30, 2021 was $2.32 trillion USD, compared with estimated aggregate liabilities of $2.50 trillion USD. Allowing for changes in financial markets through August 31, 2021, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of August the estimated aggregate assets were $2.33 trillion USD, compared with the estimated aggregate liabilities of $2.47 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 funded status of all plans sponsored by companies in the S&P 1500

S&P 1500 Pension Funded Status Decreased by 1 Percent in June
Source: Mercer, June 2021

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

December 31, 2008

6.34%

903.25

December 31, 2009

5.98%

1,115.10

December 31, 2010

5.33%

1,257.64

December 31, 2011

4.55%

1,257.60

December 31, 2012

3.71%

1,426.19

December 31, 2013

4.69%

1,848.36

December 31, 2014

3.81%

2,058.90

December 31, 2015

4.24%

2,043.94

December 31, 2016

4.04%

2,238.83

December 31, 2017

3.56%

2,673.61

December 31, 2018

4.19%

2,506.85

December 31, 2019

3.18%

3,230.78

November 30, 2020

2.37%

3,621.63

December 31, 2020

2.32%

3,756.07

January 31, 2021

2.50%

3,714.24

February 28, 2021

2.76%

3,811.15

March 31, 2021

3.01%

3,972.89

April 30, 2021

2.89%

4,181.17

May 31, 2021

2.84%

4,204.11

June 30, 2021

2.67%

4,297.50

July 31, 2021

2.51%

4,395.26

August 31, 2021

2.58%

4,522.68

[1] Figures provided by Mercer 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.

 
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