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S&P 1500 pension funding dips in March based on estimate adjustments: Mercer


The funding ratio of S&P 1500 companies with defined benefit pension plans fell two percentage points to 85% in March, according to a monthly report from Mercer L.L.C.

The drop was primarily the result of further adjustments from previous estimates. The adjustments are based on actual funding ratios reflected in companies' year-end 10-K filings.

Otherwise in March, global equity markets had flat returns, while the discount rate went up two basis points to 4.28%. If not for the 10-K filing results, the funding ratio would have remained unchanged from February's number of 87%.

The new numbers showed that overall asset values were lower than previously estimated.

“I think the biggest things is probably a little more movement than we were projecting at the time to fixed income at the end of the year,” said Jim Ritchie, principal in Mercer's retirement business, in a telephone interview. “Equities did very well at the end of 2013, but because interest rates also rose 75 to 100 points, plans were hitting some dynamic investment triggers and moving to fixed income faster than we expected.”

“Some people did lose a little bit on the equity market,” Mr. Ritchie said. “That was the risk trade-off that they were willing to take.”

Estimated aggregate assets as of March 31 totaled $1.83 trillion, down from $1.86 trillion at the end of February. Estimated projected benefit obligations totaled $2.16 trillion, up from $2.13 trillion the previous month.

Rob Kozlowski writes for Pensions & Investments, a sister publication of Business Insurance.