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Member, Beacon International Group, Ltd.
The fall in the equities markets this month has walloped the funding levels of large corporate pension plans, according to a Mercer L.L.C. analysis.
The average funding level of pension plans sponsored by companies in the S&P 1500 plunged by 10 percentage points during the first six trading days of August to close at 73% as of the Aug. 8 market close, New York-based Mercer said Tuesday.
That’s a decline from the plans’ 83% average funded ratio as of July 31 and a 15 percentage-point drop from 2011’s peak funded status, set in April when plans on average had an 88% funded ratio.
At the end of 2010, plans sponsored by S&P 1500 companies were on average 81% funded, Mercer reported.
The fall in plans’ funded status largely was driven by a 13% drop in equities, while a fall in yields on high-quality corporate bonds also contributed to the decline.
“What we are seeing is yet another ‘perfect storm’ of equity losses combined with a drop in interest rates, similar to what we saw in 2000-2001 and 2008,” Jonathan Barry, a partner in Mercer’s Retirement Risk and Finance Group in Boston, said in statement.