Mercer | S&P 1500 Pension Funded Status for July 2016

Mercer | S&P 1500 Pension Funded Status for July 2016

Pension Plans Recover Slightly Following Brexit: S&P 1500 Pension Funded Status Increased by One Percent in July

  • August 3, 2016
  • United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by one percentage point during July 2016, reaching 77 percent funded status, as positive equity markets more than offset a further decrease in discount rates. As of July 31, 2016, the estimated aggregate deficit of $562 billion USD represents a decrease of $6 billion as compared to the end of June 2016. However, this aggregate deficit remains down by $158 billion USD from the $404 billion USD deficit measured at the end of 2015, 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 3.6 percent and the MSCI EAFE index gained 5.0 percent in July. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased by 12 basis points to a low of 3.35 percent. 

“The continuing decrease in long term interest rates and the strong returns in the equity markets in July continue to remind us that plan sponsors need a sound strategy for managing the risk and volatility in their pension plans,” said Jim Ritchie, a partner in Mercer’s retirement business.  “Long term interest rates continue to drop, increasing the liabilities on plan sponsor’s balance sheets.  While the drop in rates this month was offset by strong equity returns, the S&P 500 peaked on July 22nd and stagnated for the rest of the month.  If these trends continue, pension plans will create quite a bit of heartburn for plan sponsors at year end when sponsors have to update the funded status of their plans on their financial statements.  Many plan sponsors that are starting their budgeting for 2017 are having a difficult time deciding how to budget for pension expense in 2017.  We are seeing more and more plan sponsors move to de-risking strategies as well as other financial management strategies to effectively deal with this volatility.  Those plan sponsors that are waiting for interest rates to rise before implementing a sound dynamic de-risking policy may be waiting a long time.” 

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 July 31, 2016 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, 2016 was $1.83 trillion USD, compared with estimated aggregate liabilities of $2.40 trillion USD. Allowing for changes in financial markets through July 31, 2016, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of July the estimated aggregate assets were $1.88 trillion USD, compared with the estimated aggregate liabilities of $2.44 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, July 2016 

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

Figure 2: Sample Data Points:


High Quality Corporate Bond Yield

S&P 500 Index

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



September 30, 2015



December 31, 2015



March 31, 2016



June 30, 2016



July 31, 2016



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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