Pension Funded Status Stable In March

Pension Funded Status Stable In March

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S&P 1500 pension funded status stays put in March

  • April 6, 2015
  • United States, New York

·         Deficits decreased by $6 billion USD in March to $480 billion USD       

·         Interest rates increased by 2 basis points

·         The S&P 500 index experienced a 1.7% loss in March

The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies remained at 80% as of March 31, 2015. Equity market declines were offset by slight increases in interest rates used to calculate corporate pension plan liabilities. As of March 31, 2015, the estimated aggregate deficit of $480 billion USD improved by $6 billion as compared to the end of February 2015. Funded status is up by $24 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, and a wholly-owned subsidiary of Marsh & McLennan Companies (NYSE: MMC).

The S&P 500 price index lost 1.7% in March while the MSCI EAFE index lost 2.0%. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased by two basis points to 3.62%.

“Even though March was a relatively stable month, plan sponsors have seen significant swings in funded status in 2015 and are still feeling the sting of the updated mortality tables,” said Jim Ritchie, a Principal in Mercer’s Retirement practice.  “Plan sponsors that executed on risk transfer activities in 2014 are faring much better with the mortality impact than those that did not.” 

Mercer estimates the aggregate funded status position of plans sponsored by S&P 1500 companies on a monthly basis. Figure 1 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 March 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 February 28, 2015, was $1.92 trillion USD, as compared with estimated aggregate liabilities of $2.40 trillion USD. Allowing for changes in financial markets through March 31, 2015, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of March the estimated aggregate assets were $1.90 trillion USD, compared with the estimated aggregate liabilities of $2.38 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, March 2015

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

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

January 31, 2015

3.33%

1,994.99

February 28, 2015

3.60%

2,104.50

March 31, 2015

3.62%

2,067.89

 

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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 team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 57,000 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 global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerInsights.

[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 Mercer Yield Curve Mature Plan Index rate.

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

 

 

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