Pension Shortfall Closer to Record

July 12, 2010 ( – The deficit in pension plans sponsored by S&P 1500 companies reached $451 billion at the end of June, $1 billion short of the previous record high set in mid-January 2009, according to new figures from Mercer. 

A news release said that the June deficit increase of $115 billion, caused by concurrently falling interest rates and equity values, was the third largest increase of the past decade. The June deficit corresponds to a funded status of 73% compared to 78% at the end of May. The 2009 year-end deficit was $247 billion, corresponding to a funded status of 84%. 

According to Mercer, the current downturn in pension health measures effectively erases gains achieved since January 2009, including $75 billion of contributions paid by plan sponsors in 2009. 

Mercer said larger pension deficits will translate into larger required pension contributions in 2011 for most plans under the funding rules of the Pension Protection Act, though recent funding relief signed into law will result in somewhat lower contribution requirements over the next several years as it permits deferral or extended amortization of losses experienced during 2009 – 2011 (see Pension Funding Relief Seen as Best Under the Circumstances).   

Mercer estimates the aggregate combined funded status position of plans operated by S&P 1500 companies on a monthly basis.  

The estimated aggregate value of pension plan assets of the S&P 1500 companies at December 31, 2009, was $1.25 trillion, compared with estimated aggregate liabilities of $1.50 trillion. Allowing for changes in financial markets though the end of June 2010, changes to the S&P 1500 constituents, and newly released financial disclosures, the estimated aggregate assets were $1.23 trillion, compared with the estimated value of the aggregate liabilities of $1.68 trillion.