S&P 1500 Pensions’ Funded Status Rises 1% in September

Pensions' funded status reaches highest levels since 2015.

Higher interest rates coupled with strong equity markets spurred a 1% month-over-month rise in the estimated aggregate funding status of pension plans sponsored by S&P 1500 companies in September. The combined funded status reached 83%, according to consulting firm Mercer.

“Interest rates finally moved in a positive direction while equities rose,” Matt McDaniel, a partner in Mercer’s Wealth business, said in a statement. “With both these forces working together, pension funded status is now the highest it has been since fall 2015.”

The S&P 500 and the MSCI EAFE indexes increased 1.93% and 2.23% respectively in September. Similarly, discount rates for pension plans as measured by Mercer also edged higher, by about seven basis points to 3.71%.

As of the end of September, the aggregate deficit of the plans decreased by nearly $40 billion. The month-end estimated aggregate value of pension assets and liabilities were $1.91 trillion and $2.30 trillion respectively, compared to the previous month with aggregate assets at $1.92 trillion and liabilities at $2.35 trillion.

“Now, the ball is in plan sponsors’ court to make sure they preserve these gains,” said McDaniel.“Plans using a dynamic de-risking strategy should be frequently monitoring funded status to see if triggers are hit, and those considering risk transfer transactions may find that the time is right.”                                           

Mercer’s approximations are based on each company’s latest available year-end statement, and projections to Sept. 30. The estimates include U.S. domestic qualified and non-qualified plans, as well as all non-domestic plans.

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