Reports by Mercer and UBS issued Thursday both showed improved funded status for U.S. corporate defined benefit plans.
According to Mercer, S&P 1500 companies’ plans had an aggregate funding ratio of 87% as of March 31, up two percentage points from a month earlier, reducing the plans’ total pension deficit by $43 billion to $213 billion.
The improved funding was because of company disclosures of an estimated $72 billion in contributions S&P 1500 companies made in 2010, Mercer said in a statement. That exceeded Mercer’s forecast of $43 billion in contributions.
The report notes that there was little movement in broad equity markets in March, and interest rates rose slightly. The estimated aggregate value of S&P 1500 pension plan assets was $1.44 trillion as of March 31, with aggregate liabilities of $1.66 trillion.
Strong cash positions by the S&P 1500 companies could be the reason for the higher discretionary contributions, Kevin Armant, a principal with Mercer’s financial strategy group, said in a telephone interview.
Separately, UBS Global Asset Management’s quarterly U.S. Pension Fund Fitness Tracker showed that the typical corporate defined benefit plan’s funded status rose three percentage points to 87% in the first three months of 2011.
The result was driven primarily by positive asset returns and virtually unchanged liabilities, with rising interest rates offset by narrowing credit spreads, according to a UBS news release.
Francois Pellerin, UBS’ head of asset liability investment solutions, Americas, said in a telephone interview that there is “a lot of momentum toward (liability driven investing) broadly speaking” despite positive returns in most asset classes for the quarter.
“I think people understand that good equity returns now don’t necessarily mean good equity returns forever,” he said.