The funding ratio of defined benefit pension plans of S&P 1500 companies fell four percentage points in August, to 79%, with the overall funding deficit increasing to $378 billion.
The decline was attributed to a 5.4% decrease in equities and a fall in yields on high-quality corporate bonds, according to a news release from Mercer. Corporate discount rates also dropped seven to nine basis points.
While the funding ratio drop in August was significant, there was enough recovery to gain back much of what had been lost in the first six trading days of the month, when the funding ratio had dropped 10 percentage points to 73%.
“The last week, there was a nice little recovery that came from kind of two places,” said Jonathan Barry, a partner with Mercer’s retirement risk and finance group. “First, equities went up a decent amount, which was a good thing, and the second thing that happened was interest rates did go up, particularly the rates of AA corporate funds.”
Overall, “it was all over the map,” said Mr. Barry in a telephone interview. “If you really look at the day by day it really demonstrates the volatility that these plans are exposed to.”
The estimated aggregate pension plan assets of the S&P 1500 were $1.37 trillion as of Aug. 31, with estimated aggregate liabilities of $1.68 trillion.