S&P 1500 Pension Funded Status Increased by One Percent in November

S&P 1500 Pension Funded Status Increased by One Percent in November

S&P 1500 Pension Funded Status Increased by One Percent in November

  • December 4, 2019
  • United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by one percent in November 2019 to 86%, as a result of an increase in equity markets and a slight increase in discount rates. As of November 30, 2019, the estimated aggregate deficit of $351 billion USD decreased by $20 billion USD as compared to $371 billion USD measured at the end of October 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 3.40 percent and the MSCI EAFE index increased 0.97 percent in November. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 3.08 percent to 3.10 percent.

“November was another positive month for pensions as equity markets continued to push higher,” said Scott Jarboe, a Partner in Mercer’s Wealth Business. “Despite interest rates remaining very low, pension funded status has increased modestly the past few months with equity markets driving the way. The S&P 500 continues to reach new highs and is up over 25% on the year leaving many wondering when a pull-back will happen. Plan sponsors should review their risk management strategy to ensure gains are locked in where possible and to be well positioned in light of the current market environment.”

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 November 30, 2019 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 October 31, 2019 was $2.07 trillion USD, compared with estimated aggregate liabilities of $2.44 trillion USD. Allowing for changes in financial markets through November 30, 2019, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of November the estimated aggregate assets were $2.09 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 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, November 2019

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

January 31, 2019

4.04%

2,704.10

February 28, 2019

4.09%

2,784.49

March 31, 2019

3.78%

2,834.40

April 30, 2019

3.84%

2,945.83

May 31, 2019

3.63%

2,752.06

June 30, 2019

3.44%

2,941.76

July 31, 2019

3.38%

2,980.38

August 31, 2019

2.95%

2,926.46

September 30, 2019

3.08%

2,976.74

October 31, 2019

3.08%

3,037.56

November 30, 2019

3.10%

3,140.98

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 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan Companies (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people with 76,000 colleagues and annualized revenue approaching $17 billion. Through its market-leading businesses 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.

[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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