The average funded ratio of S&P 1500 companies’ pension plans was 83% as of the end of February, unchanged from the previous month thanks to relatively benign markets, according to a report from Mercer.
Despite the stability, companies are still expected to move toward adopting investment strategies closely linked to their liabilities, because of new FASB regulations that demand greater transparency in their financial statements as of Dec. 31, 2009.
“As companies employ more sophisticated investment strategies such as interest rate swaps or synthetic long-duration bonds, the enhanced disclosures could give analysts a better indication of the degree to which a plan sponsor is hedging pension plan risk. Greater risk management increases the stability of the plan sponsor’s earnings which may be considered by analysts in their share price valuations,” said Adrian Hartshorn, a partner in Mercer’s Financial Strategy Group, in the news release.
