DB Funded Status Analyses Show Moderate Differences

Analyses by Mercer, Wilshire and LGIMA varied on whether DB funded status increased, decreased or remained the same in August.

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%.