October 2015 S&P 1500 Pension Funding

October 2015 S&P 1500 Pension Funding

S&P 1500 Pension Funded Status Increases by 4% in October

  • November 3, 2015
  • United States, New York

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 4% to 83% as of October 31st, 2015, as equity markets increased while rates remained the same as the previous month end. As of October 31st, 2015, the estimated aggregate deficit of $386 billion USD reflected a decrease of $71 billion as compared to the end of September. Funded status is now up by $118 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 of individuals, and a wholly-owned subsidiary of Marsh & McLennan Companies (NYSE: MMC).

The S&P 500 index gained 8.3% and the MSCI EAFE index gained 7.7% in October. Typical discount rates for pension plans as measured by the Mercer Yield Curve remained the same at 4.14 percent.

“October was a welcome relief after three straight months of declines,” said Matt McDaniel, Partner, Mercer Retirement. “Equity markets rallied, returning to positive territory year-to-date. Still, the outlook for pension plan sponsors is cloudy, with the new federal budget deal set to significantly increase PBGC premiums. Sponsors should look to take advantage of these gains and execute on strategies to avoid these increased costs.”

Mercer estimates the aggregate funded status position of plans sponsored by S&P 1500 companies on a monthly basis. Figure 1 (page 3) 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 October 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 September 30, 2015, was $1.75 trillion USD, compared with estimated aggregate liabilities of $2.21 trillion USD. Allowing for changes in financial markets through October 31, 2015, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of October the estimated aggregate assets were $1.82 trillion USD, compared with the estimated aggregate liabilities of $2.21 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, October 2015

 

See page 4 for High Quality Corporate Bond Yield and S&P 500 data points (Figure 2).

Figure 2: Sample Data Points:

Date

High Quality Corporate Bond Yield[3]

S&P 500 Index[4]

December 31, 2007

6.40%

1,468.36

June 30, 2008

6.97%

1,280.00

December 31, 2008

6.34%

903.25

June 30, 2009

6.79%

919.32

December 31, 2009

5.98%

1,115.10

June 30, 2010

5.33%

1,030.71

December 31, 2010

5.33%

1,257.64

June 30, 2011

5.40%

1,320.64

December 31, 2011

4.55%

1,257.60

June 30, 2012

3.87%

1,362.16

December 31, 2012

3.71%

1,426.19

June 30, 2013

4.49%

1,606.28

December 31, 2013

4.69%

1,848.36

June 30, 2014

4.07%

1,960.23

December 31, 2014

3.81%

2,058.90

March 31, 2015

3.62%

2,067.89

June 30, 2015

4.28%

2,063.11

September 30, 2015

4.14%

1,920.03

October 31, 2015

4.14%

2,079.36

 

- Ends -

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 careers 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 annual revenue of $13 billion and 57,000 colleagues worldwide, 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 an estimate of the Mercer Yield Curve Mature Plan Index rate.

 

 

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

 

 

 

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