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Pension Funds

S&P 500, 1500 pension funds end October 83% funded — 2 reports

The funded status for U.S. corporate pension plans remained relatively unchanged in October, said reports from Mercer and Northern Trust Asset Management.

According to Mercer, the estimated aggregate funding ratio of defined benefit plans sponsored by S&P 1500 companies was 83% as of Oct. 31, unchanged from Sept. 30.

Positive equity markets in October offset a 4-basis-point drop in the discount rate to 3.67%, Mercer said.

The S&P 500 gained 2.22% over the month and the MSCI EAFE index, 1.46%.

The estimated aggregate value of pension fund assets of S&P 1500 companies totaled $1.93 trillion as of Oct. 31, up from $1.91 trillion as of Sept. 30, while estimated aggregate liabilities totaled $2.32 trillion, up from $2.3 trillion at the end of September.

Year-to-date through Oct. 31, the aggregate pension deficit is down $21 billion from $408 billion as of Dec. 31, Mercer said.

"While equities performed well, discount rates continue to stay near lows for the year." said Scott Jarboe, a partner in Mercer's wealth business, in a news release on the results. . "With equity markets at all-time highs, and with the potential for tax reform moving to the top of the political agenda, we are encouraging sponsors to take a fresh look at their pension journey. With the potential for tax reform, we think many sponsors will consider accelerating contributions this year, which has dynamic implications on investment derisking and risk transfer."

In another monthly report, Northern Trust found that the average funding ratio for S&P 500 companies with corporate DB plans rose 10 basis points in October to 83%.

The funding increase was driven by a more than 2% return from global equities, which outpaced a 3-basis-point drop in the discount rate to 3.69%, Northern Trust said in a news release.

Year-to-date through Oct. 31, the average funded status is up 3 percentage points from 80% as of Dec. 31. Global equities have returned nearly 20% over that period, while discount rates have declined by 31 basis points.