July 2015 S&P 1500 Pension Funded Status

July 2015 S&P 1500 Pension Funded Status

S&P 1500 Pension Funded Status Drops 1% in July

  • August 5, 2015
  • United States, New York

S&P 1500 Pension Funded Status Drops 1% in July as Decreasing Rates Overpower Effect of Increasing Equity Markets

Sponsors continue to seek further reductions in risk

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies dropped by 1% to 83% as of July 31st, 2015, as positive equity market performance was not enough to offset the increase in liabilities resulting from decreases in interest rates used to calculate corporate pension plan liabilities. The estimated aggregate deficit of $379 billion USD as of July 31st, 2015 increased by $33 billion from the end of June. Funded status is now up by $125 billion USD from the $504 billion USD deficit measured at the end of 2014, according to Mercer,[1] a global consulting leader in advancing health, wealth and careers, and a wholly-owned subsidiary of Marsh & McLennan Companies (NYSE: MMC).

The S&P 500 index and the MSCI EAFE index each gained 2.0% in July. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased by 17 basis points to 4.11 percent.

“The solid market returns seen in July were more than offset by a decrease in discount rates over the month, which highlights just how sensitive these plans are to rate movements.” said Jonathan Barry, a Partner in Mercer’s Retirement business.  “We are seeing a lot of continued interest in plan sponsors reducing their pension plan risk.  In our recently issued survey where we partnered with CFO Magazine, we saw over 80% of plan sponsors either currently employing or considering dynamic de-risking approaches, and expect that roughly three out of four of plan sponsors will have executed lump sum transfers by the end of 2016.  Furthermore, there is increasing interest in annuitization options, with over one-third of sponsors likely or very likely to embark in a transaction in the next two years.”

Mercer estimates the aggregate funded status position of plans sponsored by S&P 1500 companies on a monthly basis. Figure 1 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 year-end statement[2] and by projections to July 31, 2015 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 June 30, 2015, was $1.83 trillion USD, as compared with estimated aggregate liabilities of $2.18 trillion USD. Allowing for changes in financial markets through July 31, 2015, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of July the estimated aggregate assets were $1.84 trillion USD, compared with the estimated aggregate liabilities of $2.22 trillion USD. Figure 2 shows the interest 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 www.mercer.com/US-pension-buyout-index .

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 2015

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

Figure 2: Sample Data Points:


High Quality Corporate Bond Yield[3]

S&P 500 Index[4]

December 31, 2007



June 30, 2008



December 31, 2008



June 30, 2009



December 31, 2009



June 30, 2010



December 31, 2010



June 30, 2011



December 31, 2011



June 30, 2012



December 31, 2012



June 30, 2013



December 31, 2013



June 30, 2014



December 31, 2014



March 31, 2015



June 30, 2015



July 31, 2015



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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 human capital. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a 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 www.mercer.com. Follow Mercer on Twitter @Mercer

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

[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. 

[3]Assumed duration of approximately 12 years. Based on Mercer Yield Curve Mature Plan Index rate. 

[4]Includes price changes only; total returns also include dividends.