It was an improvement, but it wasn't a big one—the estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by one percent to 79 percent as of March 31.
That's according to Mercer, which said that as of March 31, despite positive equity markets more than offsetting a decrease in discount rates, the estimated aggregate deficit of $492 billion now totals $88 billion more than the $404 billion deficit measured at the end of 2015.
The S&P 500 index gained 6.6 percent and the MSCI EAFE index gained 6.0 percent in March, Mercer reported. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased by 23 basis points to 3.80 percent.
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"March was a great reminder of how much influence interest rates have over the funded status of pension plans," Jim Ritchie, a partner in Mercer's retirement business, said in a statement.
Ritchie continued, "Despite strong equity markets in March, the S&P 1500 pension funded status only increased by one percent because of an approximately 20-basis-point decrease in interest rates. As rates continue to stay at historic lows, more and more plan sponsors are considering moving toward glidepath and other liability-driven investment (LDI) strategies and abandoning the hope that long-term interest rates will rise in the near future."
Mercer's estimates include U.S. domestic qualified and nonqualified plans and all nondomestic plans. The estimated aggregate value of pension plan assets of the S&P 1500 companies as of February 29 was $1.74 trillion, compared with estimated aggregate liabilities of $2.22 trillion.
Allowing for changes in financial markets through March 31, changes to the S&P 1500 constituents and newly released financial disclosures, at the end of March the estimated aggregate assets were $1.82 trillion, compared with the estimated aggregate liabilities of $2.31 trillion.
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