The aggregate funded status for defined benefit plans sponsored by S&P 500 companies rose 2.2 percentage points to 80.9% in October as rising asset values outpaced liabilities, Aon Hewitt said.
Assets rose by about 3% to $1.661 trillion in October, the result of positive investment returns of 3.6%, said the Aon Hewitt Pension Risk Tracker on Friday. Liabilities also rose by about 0.4% to $2.053 trillion, the result of a four-basis-point drop in the discount rate to 4.11%.
“While the funded status of U.S. pension plans continues to improve, the recently passed Balanced Budget Act of 2015 provides additional funding flexibility in future years, presenting a prime opportunity for sponsors to review their funding strategies,” said Ari Jacobs, senior partner and global retirement solutions leader at Aon Hewitt, in a news release. “Despite the improving funded position of U.S. pension plans, the act also increases PBGC premiums. These increases should be taken into account as plan sponsors review the strategic alternatives around their pension plans.”
Despite October’s improvement, the funded status is still down from the Dec. 31 level of 81.3%, because liability growth has outpaced assets.
Aon Hewitt estimates daily the funding ratio of the 360 S&P 500 companies with DB plans.