The funded status of U.S. corporate defined benefit plans improved in April on account of falling liabilities, said reports from Wilshire Consulting and Mercer.
The aggregate funded status of defined benefit plans sponsored by S&P 1500 companies rose two percentage points in April to 82%, Mercer said.
In April, the discount rate increased 18 basis points to 3.8%, which reduced liabilities by 2.5%. During the same period, the S&P 500 index and MSCI EAFE index gained 0.9% and 3.7%, respectively.
Mercer’s estimated aggregate plan assets totaled $1.9 trillion as of April 30, compared to estimated aggregate liabilities of $2.32 trillion. The previous month, the estimated assets and liabilities were $1.9 trillion and $2.38 trillion, respectively.
“A jump in interest rates over the last two weeks of April reversed what could have been a decline in funded status,” said Matt McDaniel, a principal in Mercer’s retirement business, in a news release. “Pension plans remain better funded than at the end of 2014, affording plan sponsors opportunities to re-evaluate their risk posture and explore methods to lock in gains.” The aggregate funded status for S&P 1500 DB plans was 79% as of Dec. 31.
Separately, Wilshire Consulting found the aggregate funding ratio for U.S. corporate pension plans rose 2.2 percentage points in April to 83.8%, the result of a 2.6% decrease in liabilities.
During the same period, negative fixed-income returns offset positive equity returns holding asset values relatively stable.
The figures are the result of estimates of combined assets and liabilities of S&P 500 firms that have defined benefit plans.
The estimated asset allocation is 32% domestic equity, 27% long-duration fixed income, 21% international equity, 18% core fixed income and 2% real estate.
Wilshire Consulting is the institutional investment consulting and outsourced CIO unit of Wilshire Associates.