Largest Companies' Pensions Show Funding Improvement in March

April 8, 2009 ( - As equity markets rebounded and bond yields continued to increase, the funded status of pension plans of the S&P 1500 improved by $158 billion in March, according to the latest estimates from Mercer.

The aggregate deficit of pension plans sponsored by S&P 1500 companies was $215 billion at the end of March, down from $373 billion at the end of February (see Bond Yields Save Largest Pensions from Funding Decline ). A Mercer press release said the aggregate funded status was 83% at the end of March, up from 74% at the end of February.

Adrian Hartshorn, a member of Mercer’s Financial Strategy Group, said in the press release that, during the quarter, the aggregate funded level for these plans improved by $194 billion, driven by an increase in bond yields.

Mercer pointed out that on March 31, the IRS announced that sponsors with calendar-year end pension plans may reasonably determine 2009 funding targets using the full yield curve for October 2008, regardless of the yield curve option used in 2008 (see IRS Takes “Reasonable” Approach on Yield Curve ). Doing so will reduce the value of plan liabilities by 10% to 20% and improve the funded status by a corresponding amount, the press release said.