The funded status of U.S. corporate pension plans improved slightly in June, said two new reports released Monday.
According to a Mercer report, the estimated aggregate funding ratio of S&P 1500-sponsored pension plans improved to 84% as of June 30, a one-percentage-point jump from the previous month, primarily because of rising discount rates.
The typical discount rate measured by the Mercer yield curve increased to 4.28% as of June 30, up 29 basis points from the previous month, canceling out losses by the S&P 500 and MSCI EAFE indexes of 2.1% and 3%, respectively, during June.
The estimated aggregate value of pension fund assets of S&P 1500 companies as of June 30 totaled $1.83 trillion, down from $1.89 trillion the previous month, while estimate aggregate liabilities totaled $2.18 trillion as of June 30, down from $2.27 trillion the previous month.
“Just looking at stock market performance, we might have expected pension funded status to decline,” Matt McDaniel, partner in Mercer's retirement business, said in a news release, “but discount rates continue to rise. We now have the highest discount rates we've seen since late 2013.”
In a separate report, Wilshire Consulting, the institutional investment advisory and outsourced CIO business unit of Wilshire Associates, also said funding improved in June.
The aggregate funding ratio for U.S. corporate pension plans rose to 86.2% as of June 30, the Wilshire report said, the result of a larger drop in liabilities than the drop in assets due to negative investment returns.
Liability values dropped 3.5%, compared to a 2.8% drop in assets from the previous month. As of May 31, the estimated aggregate funding ratio was 85.6%.