Reports about defined benefit (DB) plans’ funded status suggest a slight bump in July.
The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by one percentage point during July, reaching 77%, as positive equity markets more than offset a further decrease in discount rates, according to Mercer.
Mercer says the S&P 500 index gained 3.6% and the MSCI EAFE index gained 5.0% in July. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased by 12 basis points to a low of 3.35%.
The aggregate funded ratio for U.S. S&P 500 corporate pension plans increased by 0.8 percentage points to end the month of July at 76.3%, narrowing its year-to-date decline to 5.1 percentage points, according to Wilshire Consulting. The monthly change in funding resulted from a strong 2.9% rise in asset values that was partially offset by a 1.9% increase in liability values. The year-to-date decrease in funding is the result of a nearly 14% increase in liability values.
Mercer reports that as of July 31, the estimated aggregate deficit of $562 billion for S&P 1500 plans represents a decrease of $6 billion as compared to the end of June. However, this aggregate deficit remains down by $158 billion from the $404 billion deficit measured at the end of 2015.