The funding ratio of S&P 1500 companies with defined benefit pension plans fell 1 percentage point to 84% in April, according to a monthly report from Mercer.
The decline was due to a rise in liabilities and modest U.S. equity market returns.
U.S. equity markets were up just 0.6%, while the discount rate was down 11 basis points to 4.17%.
There has been a movement among plan executives to adopt liability-driven investment strategies, said Jim Ritchie, principal in Mercer's retirement business, in a telephone interview. However, “some plan sponsors are hesitant to go to full hedging liability strategies.”
Additionally, although some plan executives expect interest rates to rise over the next few years, “it might still be to their benefit to move to more LDI strategies,” Mr. Ritchie said.
Estimated aggregate assets as of April 30 totaled $1.84 trillion, up from $1.83 trillion at the end of March and down from $1.85 trillion as of Dec. 31. Estimated projected benefit obligations totaled $2.2 trillion, up from $2.16 trillion as of March 31 and up from $1.96 trillion at the end of December.
