S&P 1500 Pension Deficits Decrease by $4B in April

May 5, 2011 (PLANSPONSOR.com) - The aggregate deficit in pension plans sponsored by S&P 1500 companies decreased by approximately $4 billion during April, from a deficit of approximately $213 billion as of March 31, to $209 billion, according to new figures from Mercer.

A Mercer news release said this deficit corresponds to an aggregate funded ratio of 88% as of April 30, compared to a funded ratio of 81% at December 31, 2010. This is the eighth month of improving funded status for S&P 1500 companies since a low point of 71% was reached in August 31, 2010.   

Mercer also estimates that on an accrued benefits basis (which excludes future salary growth) nearly one in four plan sponsors have fully funded benefit obligations compared to only one in 15 last August.  

Despite April equity returns of close to 3%, the positive asset growth was almost entirely offset by a decrease in yields on high quality corporate bonds, with the discount rate for the typical U.S. pension plan decreasing approximately 12-14 basis points during the month.   

“One positive to take away from the continued improvement in funded status is the opportunity for plan sponsors to re-evaluate their pension financial policies and potentially reduce some of the risks they are exposed to,said Jonathan Barry, a partner with Mercer’s Retirement Risk and Finance group, in the announcement.