Pension Funded Status Rises in October

Funding levels of S&P 500 pensions reversed course after three straight months of declines. 

The estimated aggregate funding level of S&P 500 pensions increased by 4%, to reach 83% of liabilities by the end of October, according to Mercer’s monthly corporate pension funded status index.

After the month’s gain, the estimated aggregate deficit of $386 billion reflected a dip of $71 billion, compared with the previous month. Funded status is now up by $118 billion from the $504 billion deficit at the end of 2014, Mercer says. 

The S&P 500 index gained 8.3% and the MSCI EAFE index gained 7.7% in October. Typical discount rates for pension plans as measured by the Mercer Yield Curve remained the same, at 4.14%.

“October was a welcome relief after three straight months of declines,” says Matt McDaniel, a partner in Mercer’s retirement unit. “Equity markets rallied, returning to positive territory year to date. Still, the outlook for pension plan sponsors is cloudy, with the new federal budget deal set to significantly increase PBGC premiums. Sponsors should look to take advantage of these gains and execute on strategies to avoid these increased costs.”