According to Mercer, the estimated aggregate funding ratio of pension plans sponsored by S&P 1500 companies rose slightly to 79% at the end of May, up 100 basis points from April, due to a slight increase in discount rates, and relatively flat equity market returns. The discount rate rose two basis points over the month to 3.75%, while the S&P 500 index and MSCI EAFE index returned 1.5% and -1.5%, respectively, Mercer said.
The estimated aggregate value of pension fund assets of S&P 1500 companies totaled roughly $1.82 trillion as of May 31, unchanged from April 30, while estimated aggregate liabilities totaled roughly $2.32 trillion, down 0.4% from last month.
In another monthly report, Wilshire Consulting found the aggregate funding ratio for U.S. corporate pension plans declined 70 basis points over the month to 76.8% due to a slight increase in liabilities (0.8%) and a small decline in asset values (-0.1%).
“Though U.S. stocks posted positive returns in May, assets were flat overall as a rising U.S. dollar eroded the value of non-U.S. stock holdings,” said Ned McGuire, vice president and a member of the pension risk solutions group of Wilshire Consulting, in a news release. “The Wilshire 5000 Total Market index gained 1.8% during the month reaching a year-to-date high on the next to last trading day of May. Narrowing long corporate AA+ credit spreads pushed lower the corporate bond yields used to value pension liabilities, which led to a 0.8% increase in liability values.” The discount rate declined seven basis points over the month, Wilshire estimated.
According to LGIMA's monthly Pension Fiscal Fitness Monitor, the funded status of a typical U.S. corporate pension plan remained at 78.2% due to relatively unchanged liability and asset values.
Liabilities for the average plan rose 0.19% in May. Plans with a traditional 60% global equity and 40% aggregate fixed-income asset allocation saw their assets increase 0.14% over the month due to flat equity market returns.