The aggregate funded ratio for U.S. corporate pension plans increased by 0.2 percentage points to end the month of August at 76.2%, narrowing its year-to-date decline to 5.1 percentage points, according to Wilshire Consulting.
According to Wilshire, the monthly change in funding resulted from a larger decrease in liability values of 0.3% that was partially offset by a 0.1% decrease in asset values. The year-to-date decrease in funding is the result of a 15% increase in liability values.
Wilshire’s aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration in-line with the Citi Group Pension Liability Index – Intermediate. The Funded Ratio is based on the CPLI – Intermediate liability, with service cost, benefit payments and contributions in-line with Wilshire’s 2016 corporate funding study. The most current month end liability growth is estimated using the Barclays Long Aa+ U.S. Corporate Index.
Mercer reports that the estimated aggregate funding level of pension plans sponsored by S&P 1500 companies remained relatively level at 77% during August, as a small increase in discount rates was offset by slight negative returns in equity markets. As of August 31, the estimated aggregate deficit of $570 billion represents an increase of $8 billion as compared to the end of July. The aggregate deficit remains down by $166 billion from the $404 billion deficit measured at the end of 2015.
Mercer notes that the S&P 500 index lost 0.1% and the MSCI EAFE index lost 0.2% in August. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased by 3 basis points to 3.38%.
According to Legal & General Investment Management America, Inc. (LGIMA), pension funding ratios modestly decreased over August. Global equity markets increased 0.39% and the S&P 500 increased 0.14%. LGIMA estimates plan discount rates were unchanged, as Treasury rates rose 7 basis points while credit spreads tightened 7 basis points. Overall, liabilities for the average plan were up 0.40%, while plan assets with a traditional “60/40” asset allocation decreased by 0.16%.