Mercer: S&P 1500 funding ratio improves for 2nd straight month

The funding ratio of S&P 1500 companies' defined benefit pension plans improved slightly in September to 73%, the second straight month of slight gains, according to Mercer's monthly funded status report.

The overall funding deficit for the month dropped to $593 billion from $631 billion in August. Mercer reported a deficit of $689 billion in July, for a record low funding ratio of 70%.

Discount rates rose two basis points from 3.62% in August.

Kevin Armant, principal in Mercer's financial strategies group, said in a telephone interview that strong equity performance in September contributed to the increase in funding ratio.

“We actually had a month where interest rates stayed fairly constant amid stronger equity markets,” Mr. Armant said. Unlike previous months when strong stock performance was undone by falling interest rates, the performance was enough to increase funded status for September.

However, while the month was an improvement, it's not necessarily a trend.

“We've seen a continued volatility with these numbers and it's really hard to get a sense that we're trending in this direction,” Mr. Armant said.

The estimated aggregate value of pension plan assets of S&P 1500 companies as of Sept. 30 was $1.60 trillion, up from $1.59 trillion at the end of August. Estimated aggregate liabilities decreased to $2.19 trillion from $2.22 trillion the previous month.