Sponsor Contributions Drive up Pension Funding

April 7, 2011 (PLANSPONSOR.com) - The aggregate deficit in pension plans sponsored by S&P 1500 companies decreased by $43 billion during March, from a deficit of approximately $256 billion as of February 28, 2011, to $213 billion as of March 31, according to new figures from Mercer.

This deficit corresponds to an aggregate funded ratio of 87% as of March 31, compared to a funded ratio of 81% at December 31, 2010.  

Despite little movement in broad equity indices and only slightly rising interest rates during the month, Mercer’s analysis showed continued improvement in funded status due primarily to new information provided by the plan sponsors. According to a news release, March 2011 marked the release of the annual financial statements for companies with fiscal years ending December 31, which comprise about two-thirds of the index’s constituents. Based on these disclosures, Mercer estimates that plan sponsors in the S&P 1500 contributed $72 billion to their plans during calendar 2010, far exceeding expected contributions of $43 billion that employers disclosed at the end of 2009.   

Mercer said some of the impetus for additional funding has been driven by extremely low financing rates available to high quality corporate issuers. 

The estimated aggregate value of pension plan assets of the S&P 1500 companies at December 31, 2010, was $1.37 trillion, compared with estimated aggregate liabilities of $1.68 trillion. Allowing for changes in financial markets though the end of March 2011, changes to the S&P 1500 constituents and newly released financial disclosures, the estimated aggregate assets were $1.44 trillion, compared with the estimated aggregate liabilities of $1.66 trillion as of March 31, 2011.