Interest rates, equity gains give pension plans big February boost
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Sharply higher interest rates, which decreased the value of plan liabilities, and gains in the equity markets caused pension plan funding levels among large employers to rise sharply in February, according to a report released Wednesday by Mercer L.L.C.
The estimated aggregate funding deficit in pension plans sponsored by Standard & Poor’s 1500 employers fell to $486 billion as of Feb. 28, down from $654 billion at the end of January.
The aggregate plan funding ratio leaped to 80%, up from 74% at the end of January and 79% at the end of December.
January’s aggregate funding level was the lowest for S&P 1500 employers since the end of 2012, Mercer earlier reported.
"Capital market conditions in February were a welcome relief to plan sponsors after the pain felt in December and January,” Matt McDaniel, a Mercer principal in Philadelphia, said in a statement.
“The $168 billion improvement in funded status is the largest single-month gain since we began to track this in 2007,” Mr. McDaniel said, adding that plan sponsors need a plan to lock in the gains “or they risk losing them.”
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