The aggregate funding ratio for S&P 500 companies sponsoring defined benefit plans increased by 1.7 percentage points to 87.5% as of June 30, 2018, from 85.8% as of the end of fiscal year 2017, said Wilshire Associates' 2019 Corporate Pension Funding Report.
In the report, Wilshire estimates that aggregate assets decreased to $1.332 trillion as of June 30, 2018, down 6.5% from a year earlier. Contributions increased asset value by 4% for the fiscal year.
The median discount rate increased by 54 basis points to 4.2%, which drove a liability value decrease of $106.4 billion. In total, the liability value decreased by $139.8 billion, or 8.4%, due to actuarial gains and benefit payments in 2018.
Of the plans studied, 19% had pension assets that equal or exceed liabilities as of the end of fiscal 2018, compared to 18.7% as of the end of fiscal 2017.
"Negative aggregate returns on investment and benefits paid drove asset values lower in 2018," said Ned McGuire, managing director and member of the investment management and research group at Wilshire Consulting, in a news release. "As interest rates rose, companies were allowed to increase their discount rates, thereby decreasing the accounting value of total pension liabilities."
The aggregate pension expense for the S&P 500 index companies in the study was $20.7 billion for 2018, down from $25.4 billion a year earlier.