Pension plans sponsored by S&P 1500 companies have hit their highest funding levels since October 2008.
Funding ratios increased to 88 percent in June, up 14 percent since year-end 2012, according to a report from Mercer.
Further highlighting a positive six months for the sector, Mercer estimated 15 percent of plan sponsors had assets in excess of pension obligations as opposed to only 4 percent in December 2012.
Recommended For You
The explanation lies in the continued rise in interest rates, which reduced funding liabilities.
Given Federal Reserve Chairman Ben Bernanke's intention of phasing out quantitative easing, funding levels for these pensions should continue to rise with interest rates.
According to the Mercer report, discount rates for a typical pension plan rose 33 to 42 basis points during June, following a 46-point increase in May.
Mercer cautioned that the volatility of interest rates is something plan sponsors need to keep in mind.
The report also noted the aggregate funding deficit decreased by $47 billion during June alone, amounting to $222 billion.
Mercer estimates funding levels for the S&P 1500 monthly. The estimated aggregate value of the plans for fiscal 2012 was $1.59 trillion compared with estimated aggregate liabilities of $2.14 trillion. These figures increased in the first six months of 2013 to an estimated value of $1.64 trillion and estimated liabilities dropping to $1.86 trillion.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
