S&P 1500 pension plans funding levels

S&P 1500 pension plans funding levels

S&P 1500 pension plans’ funding levels rise to highest point since 2008

  • 04-June-2013
  • United States, New York

 Funding levels of pension plans sponsored by S&P 1500 companies continued a strong rebound in 2013, with the aggregate deficit decreasing by $150 billion during the month, resulting in a $269 billion deficit as of the end of May 2013, according to Mercer.  The funded ratio (assets divided by liabilities) increased from 80% to 86% during May, to close out the month at the highest level since June 2011.

A continuing bull market in equities which saw another 2.3% growth during May improved asset levels, while a 46 bps rise in high quality corporate bond rates reduced the estimated liabilities by over 7%.

“We have seen great leaps in funded status in the first half of 2013, and sponsors will certainly be hoping for more of the same over the coming months.” said Jonathan Barry, a partner in Mercer’s Retirement business.  “This improvement dovetails nicely with feedback we are getting from clients who have implemented a glide path strategy - they are reaping the rewards of this rapid improvement and locking in the gains”.

“We have executed over 100 dynamic de-risking triggers on behalf of clients since the financial crisis with a significant uptick in activity over the past month” said Richard McEvoy, a Partner in Mercer’s Investment business.  “This also highlights the benefit of having a nimble execution process in place ahead of time to capitalize on market changes as they arise”

Mercer estimates the aggregate funded status position of plans operated 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 operated by companies in the S&P 1500. The estimates are based on each company’s year end statement  and by projections to May 31, 2013 in line with financial indices. This includes 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 December 31, 2012, was $1.59 trillion, compared with estimated aggregate liabilities of $2.14 trillion. Allowing for changes in financial markets through May 31, 2013, changes to the S&P 1500 constituents and newly released financial disclosures, the estimated aggregate assets were $1.70 trillion, compared with the estimated aggregate liabilities of $1.97 trillion.

Notes for editors
Unless otherwise stated, the calculations are based on the Financial Accounting Standard (FAS) funding position and include analysis of the S&P 1500 companies.

Information on the Mercer Yield Curve is available at www.mercer.com/pensiondiscount.

The Mercer US Pension Buyout Index may be accessed at www.mercer.com/US-pension-buyout-index

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 20,000 employees are based in more than 40 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 52,000 employees worldwide and annual revenue exceeding $10 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.