The aggregate funding ratio for the pension funds of S&P 1500 companies improved two percentage points to 75% in July, Mercer reports.
That reduced the combined deficit by $20 billion, to $431 billion, according to a Mercer report.
BNY Mellon Asset Management reported similar results Aug. 5, showing that U.S. corporate defined benefit pension plans rebounded in July, with the funding level increasing 2.9 percentage points to 76.9%.
Gordon Young, U.S. integrated retirement financial management business leader at Mercer, said recent volatility in funded status is making plan executives “acutely aware” of the need to model year-end results, using several different scenarios.
“If (volatility) continues, the impact is more uncertainty for your projections, and you have to take that into account when you do that projection,” he said in a telephone interview.
The Mercer report also noted concern over the level of the Aa bond yield, which had declined below 5.5%, as of July 31. The lower bond values result in higher plan obligations.
“Again, relatively low bond yields also raise issues for plans beginning to forecast year-end results as they may be entering the budgeting season,” Mr. Young said in a news release. “It is difficult to know exactly how to forecast, as it is unclear whether the discount rate will remain low or increase during the remaining months of this year. A set of varying economic assumptions is the best approach.”
The estimated aggregate assets of pension plans in the S&P 1500 were $1.29 trillion, compared with liabilities of $1.72 trillion, according to the report.
