Mercer | S&P 1500 Pension Funded Status Remained Level January

Mercer | S&P 1500 Pension Funded Status Remained Level January

S&P 1500 Pension Funded Status Remained Level January

  • February 3, 2017
  • United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies remained relatively level at 82 percent funded status at the end of January 2017 as compared to the end of 2016.  The positive equity returns in January were not enough to move the needle this month as discount rates remained relatively flat. As of January 31, 2017, the estimated aggregate deficit of $400 billion USD decreased by $8 billion as compared to the $408 billion USD deficit measured at the end of 2016, according to Mercer,[1] a global consulting leader in advancing health, wealth and careers of individuals, and a wholly-owned subsidiary of Marsh & McLennan Companies (NYSE: MMC). 

The S&P 500 index gained 1.8 percent and the MSCI EAFE index gained 2.9 percent in January. Typical discount rates for pension plans as measured by the Mercer Yield Curve remained level at 4.04 percent. 

”January is another reminder that equity returns alone will likely not improve the funded status of pension plans,” said Jim Ritchie, a partner in Mercer’s retirement business.  “Many pension plans have large exposures to fixed income assets with durations much shorter than the liabilities, resulting in a significant bet on interest rates going up in the future.  While most pundits believe interest rates will go up in the long run, it is the short run that creates havoc on plan sponsors’ balance sheets and income statements.  Another interesting development this year will be the release of the Financial Accounting Standards Board’s update for recognizing pension expense.  This update may result in a reduction in the amount of expense recognized as operating expense with the remaining amount essentially falling ‘below the line’.  These two issues should encourage plan sponsors to re-think their asset allocation strategies for their pension plans.” 

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 January 31, 2017 in line with financial indices. The estimates include US domestic qualified and non-qualified plans and all non-domestic plans. The estimated aggregate value of pension plan assets of the S&P 1500 companies as of December 31, 2016 was $1.81 trillion USD, compared with estimated aggregate liabilities of $2.21 trillion USD. Allowing for changes in financial markets through January 31, 2017, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of January the estimated aggregate assets were $1.81 trillion USD, compared with the estimated aggregate liabilities of $2.21 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

The Mercer US Pension Buyout Index may be accessed at

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, January 2017 

See Figure 2 (below) for High Quality Corporate Bond Yield and S&P 500 data points.

Figure 2:


High Quality Corporate Bond Yield

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About Mercer

Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 60,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit Follow Mercer on Twitter @Mercer

Mercer Investment Consulting, LLC is a federally registered investment adviser under the Investment Advisers Act of 1940, as amended, providing nondiscretionary and discretionary investment advice to its clients on an individual basis. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Mercer’s Form ADV Part 2A & 2B can be obtained by written request directed to:  Compliance Department, Mercer Investments, 701 Market Street, Suite 1100, St. Louis, MO  63101. 

[1]Figures provided by Mercer Investment Consulting, Inc. 

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