Updated with correction, Sept. 1, 2010
Declining equity markets and interest rates reduced the aggregate funding ratio for S&P 1500 companies' pension funds to 71% in August, four percentage points less than July, increasing the deficit by $76 billion to a combined $506 billion, according to a Mercer report.
The deficit is the largest ever recorded by S&P 1500 companies since Mercer began tracking them in 1999, “and is also more than double their 2009 year-end deficit of $247 billion,” according to a Mercer news release.
Gordon Young, integrated retirement financial management leader for Mercer, said in the news release that if the low funded status persists for the rest of 2010, companies' net balance sheet liabilities and income statement expense for 2011 will increase significantly.
“Some of this may be mitigated by various smoothing methods and pension funding relief, but nonetheless these market conditions will certainly grab the attention of plan sponsors,” he said.
Mercer's estimated the aggregate value of pension plan assets of S&P 1500 companies was $1.27 trillion, compared with aggregate liabilities of $1.77 trillion. The aggregated value of S&P 1500 companies' pension plans at Dec. 31, 2009, was $1.25 trillion, compared with aggregate liabilities of $1.5 trillion.
