The estimated aggregate funded status of pension plans sponsored by S&P 1500 companies rose in 2015.
According to data from consultant firm Mercer, decreases in equity and fixed income markets were more than offset by increases in the interest rates that are used to calculate corporate pension plan liabilities.
That resulted in an increase of 3 percent in funded status, as of December 31, 2015, to 82 percent. On December 31, 2014, funded status only reached 79 percent. That means the deficit of approximately $504 billion at the end of 2014 was cut by about $100 billion to $404 billion.
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The S&P 500 index decreased by 0.7 percent during 2015 and the MSCI EAFE index decreased by 3.3 percent. Typical discount rates for pension plans as measured by the Mercer yield curve increased by 43 basis points to 4.24 percent.
Mercer also found that, despite volatile equity markets, funded status increased in 2015. The falling of deficits in 2015 meant that totals approached levels held at the end of 2013. The decrease in deficits from year-end 2014 to year-end 2015 will drive adjustments to balance sheets and 2016 P&L expense, the firm said.
Interest rates increased by 43 basis points from 2014 year-end, more than offsetting the negative impact of decreases in equity markets in 2015.
"Plan sponsors have been waiting for years to see an increase in interest rates help improve their funded status. In 2015, we took a small step in that direction," Matt McDaniel, a partner in Mercer's retirement business, said in a statement.
McDaniel added, "If rates continue to rise, funded status will further improve. But, recent history has shown us how volatile rates can be, so plan sponsors need to define now the specific actions they will take as rates rise, so they can be ready to execute. Otherwise, they risk falling into the same trap as 2008, when a majority of plans were fully funded but failed to lock in gains."
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