The funded status for U.S. corporate pension plans rose in September, said reports from Mercer, Wilshire Consulting and Northern Trust Asset Management.
According to Mercer, the estimated aggregate funding ratio of defined benefit plans sponsored by S&P 1500 companies was 83% as of Sept. 30, up 1 percentage point from August on the back of rising discount rates and positive equity market returns.
Discount rates rose 7 basis points in September to 3.71%. The S&P 500 and MSCI EAFE indexes returned 1.93% and 2.23%, respectively.
The estimated aggregate value of pension fund assets of S&P 1500 companies totaled $1.91 trillion as of Sept. 30, down from $1.92 trillion as of Aug. 31, while estimated aggregate liabilities totaled $2.3 trillion, down from $2.35 trillion at the end of August.
"Interest rates finally moved in a positive direction while equities rose," said Matt McDaniel, a partner in Mercer's wealth business, in a news release on the results. "With both these forces working together, pension funded status is now the highest it has been (in about two years). Now, the ball is in plan sponsors' court to make sure they preserve these gains. Plans using a dynamic derisking strategy should be frequently monitoring funded status to see if triggers are hit, and those considering risk transfer transactions may find that the time is right."
According to Wilshire, the aggregate funding ratio for S&P 500 companies with corporate pension plans rose 1.3 percentage point in September to 84.7%.
Asset values increased 0.5% over the month, while liabilities decrease 0.9%, Wilshire said. Year-to-date through Sept. 30, the aggregate funded status is up 2.8 percentage points. In the third quarter, the funded status rose 1.4 percentage points.
September also marks "the 11th consecutive month of gains for the Wilshire 5000 Total Market index, its longest such streak in more than 30 years," added Ned McGuire, managing director and a member of the pension risk solutions group of Wilshire Consulting, in a news release on the results. The Wilshire 5000 Total Market index returned 2.41% in September.
As measured by Northern Trust, the average funding ratio for S&P 500 companies with corporate defined benefit plans rose 1.2 percentage points over the month to 82.9%.
A 7-basis-point increase in the discount rate to 3.72% and nearly 2% return from global equities drove the funding increase in September, Northern Trust said.
Year-to-date through Sept. 30, the funding ratio is up 2.9 percentage points, discount rates are down 28 basis points and global equities are up approximately 17%.