S&P 1500 Pension Funded Status Decreased by 1 Percent in September


New York, N.Y., October 5, 2021 – The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies decreased by 1 percent in September 2021 to 94 percent as a result of a decrease in equity markets partially offset by an increase in discount rates. As of September 30, 2021, the estimated aggregate deficit of $148 billion USD increased by $15 billion USD as compared to a deficit of $133 billion USD measured at the end of August according to Mercer,1 a global consulting leader and a business of Marsh & McLennan (NYSE: MMC).

 

The S&P 500 index decreased 4.76 percent and the MSCI EAFE index decreased 3.19 percent in September. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 2.58 percent to 2.74 percent.

 

“Funded status took a small step back in September as US equity markets had their worst month in over a year,” said Scott Jarboe, a Partner in Mercer’s Wealth Business. “Fortunately for pension plans, interest rates bounced back offsetting some of the impact of poor equity market performance. As we enter the fourth quarter, many plan sponsors are planning for next year and have to contend with incredible uncertainty in equity and bond markets driven by a variety of factors, including Fed tapering bond purchases and potentially increasing short term rates next year, inflation concerns, and the on-going pandemic. With the funded status gains many plans have realized this year, de-risking  activities should be given close consideration as they may be attractive ways to stabilize funded status amid such market uncertainty.”

 

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 statement2 and by projections to September 30, 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 August 31, 2021 was $2.33 trillion USD, compared with estimated aggregate liabilities of $2.47 trillion USD. Allowing for changes in financial markets through September 30, 2021, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of September the estimated aggregate assets were $2.26 trillion USD, compared with the estimated aggregate liabilities of $2.40 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 funded status of all plans sponsored by companies in the S&P 1500

S&P 1500 Pension Funded Status Decreased by 1 Percent in September
Source: Mercer, September 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

December 31, 2020

2.32%

3,756.07

January 31, 2021

2.50%

3,714.24

February 28, 2021

2.76%

3,811.15

March 31, 2021

3.01%

3,972.89

April 30, 2021

2.89%

4,181.17

May 31, 2021

2.84%

4,204.11

June 30, 2021

2.67%

4,297.50

July 31, 2021

2.51%

4,395.26

August 31, 2021

2.58%

4,522.68

September 30, 2021

2.74%

4,307.54

[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 approximately 25,000 employees are based in 43 countries and the firm operates in 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 78,000 colleagues and annual revenue of over $18 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 mercer.com. Follow Mercer on LinkedIn and Twitter.

CONTACT INFORMATION