The funded status of S&P 1500 companies with defined benefit pension plans rose one percentage point to 85% in June, said a monthly report from Mercer.
The funding increase was driven by equity returns and a slight rise in interest rates.
U.S. equity markets returned 1.9% in June, while the discount rate was up one basis point to 4.07%, up from 4.06% in May.
Despite these modest improvements in the month, year-to-date the funded status has declined three percentage points, said Jonathan Barry, partner in Mercer’s Retirement business, in a telephone interview.
Declining interest rates have offset decent equity growth year to date, resulting in a funding drop, said Mr. Barry.
“(The discount rate) is a big driver of pension plan funded status” said Mr. Barry. “It’s a very powerful item.”
Estimated aggregate assets as of June 30 totaled $1.88 trillion, up from $1.87 trillion at the end of May and from $1.8 trillion as of Dec. 31. Estimated projected benefit obligations remained at $2.21 trillion for the second consecutive month, up from $2.03 trillion at the end of December.
Mr. Barry added that Mercer has seen an uptick in the number of plan sponsors looking to transfer risk off of the balance sheet by offering lump sums to former employees. Mr. Barry said he anticipates plan executives will continue to use this strategy in 2015.