S&P 1500 Pension Funded Status Remained Level in October

S&P 1500 Pension Funded Status Remained Level in October

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S&P 1500 Pension Funded Status Remained Level in October

  • November 6, 2017
  • United States, New York

The estimated aggregate funding status of pension plans sponsored by S&P 1500 companies remained level at 83% in October 2017, as a result of a decrease in discount rates offset by positive equity markets. As of October 31, 2017, the estimated aggregate deficit of $387 billion USD represents a decrease of $5 billion as compared to the deficit measured at the end of September 2017. The aggregate deficit is down $21 billion USD from the $408 billion measured at the end of 2016 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 gained 2.22 percent and the MSCI EAFE index gained 1.46 percent in October. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased by 4 basis points to 3.67 percent. 

“While equities performed well, discount rates continue to stay near lows for the year.” said Scott Jarboe, a Partner in Mercer’s Wealth business. “With equity markets at all-time highs, and with the potential for tax reform moving to the top of the political agenda, we are encouraging sponsors to take a fresh look at their pension journey.  With the potential for tax reform, we think many sponsors will consider accelerating contributions this year, which has dynamic implications on investment de-risking and risk transfer.”                                               

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 October 31, 2017 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 September 30, 2017 was $1.91 trillion USD, compared with estimated aggregate liabilities of $2.30 trillion USD. Allowing for changes in financial markets through October 31, 2017, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of October the estimated aggregate assets were $1.93 trillion USD, compared with the estimated aggregate liabilities of $2.32 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, October 2017 

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

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

June 30, 2015

4.28%

2,063.11

December 31, 2015

4.24%

2,043.94

June 30, 2016

3.47%

2,098.86

December 31, 2016

4.04%

2,238.83

June 30, 2017

3.78%

2,423.41

July 31, 2017

3.76%

2,470.30

August 31, 2017

3.64%

2,471.65

September 30, 2017

3.71%

2,519.36

October 31, 2017

3.67%

2,575.26

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 22,000 employees are based in 43 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With more than 60,000 colleagues and annual revenue over $13 billion, through its market-leading companies 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 Investment Consulting 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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