S&P 1500 Pension Funded Status Increased by 5 Percent in February


New York, N.Y., March 3, 2021 –
The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 5 percent in February 2021 to 90 percent as a result of an increase in discount rates and an increase in equity markets. As of February 28, 2021, the estimated aggregate deficit of $236 billion USD decreased by $147 billion USD as compared to $383 billion USD measured at the end of January according to Mercer,[1] a global consulting leader and a business of Marsh & McLennan (NYSE: MMC).

 

The S&P 500 index increased 2.61 percent and the MSCI EAFE index increased 2.11 percent in February. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 2.50 percent to 2.76 percent.

 

“February was the best month for pension plans in the past six years,” said Matt McDaniel, a Partner in Mercer’s Wealth Business. “Interest rates increased and equity markets continued to surge forward during the month, resulting in a significant jump in pension funded status. With the substantial rise in funded status, plan sponsors are embarking on a variety of activities. We saw a lot of glide path triggers get hit in February, and sponsors traded out of equities and into fixed income. Additionally, those with well-funded, frozen plans are now seriously looking toward plan termination as a viable option. Plan sponsors should review their pension risk toolkit as doors may have opened that were closed just a few months ago.”

 

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 February 28, 2021 in line with financial indices. The estimates include U.S. 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 January 31, 2021 was $2.15 trillion USD, compared with estimated aggregate liabilities of $2.53 trillion USD. Allowing for changes in financial markets through February 28, 2021, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of February the estimated aggregate assets were $2.15 trillion USD, compared with the estimated aggregate liabilities of $2.38 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, February 2021

 

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

December 31, 2019

3.18%

3,230.78

May 31, 2020

2.69%

3,044.31

June 30, 2020

2.57%

3,100.29

July 31, 2020

2.20%

3,271.12

August 31, 2020

2.46%

3,500.31

September 30, 2020

2.53%

3,363.00

October 31, 2020

2.64%

3,269.96

November 30, 2020

2.37%

3,621.63

December 31, 2020

2.32%

3,756.07

January 31, 2021

2.50%

3,714.24

February 28, 2021

2.76%

3,811.15

 

[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.

 

###
 

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. 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 (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 76,000 colleagues and annual revenue of $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.

CONTACT INFORMATION