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Rising bond interest rates boost large employer pension funding


The funded status of pension plans sponsored by large employers improved in June, aided by a rise in bond interest rates, which reduced the value of plan liabilities, according to a Mercer L.L.C. analysis released Monday.

On average, pension plans sponsored by companies in the S&P 1500 were 84% funded as of June 30, up from 83% as of May 31, and a big jump from the end of January when the plans were 74% funded, on average.

“We now have the highest discount rates we’ve seen since late 2013. Sponsors who were putting off derisking until rates rise may now want to consider activating their risk management plans,” Matt McDaniel, a partner in Mercer’s Philadelphia office said in a statement.

Pension derisking refers to such corporate practices as offering certain plan participants the option to convert their retirement annuity to a cash lump sum and shifting pension plan liabilities to insurers through the purchase of group annuities.

In the aggregate, the Mercer analysis found that the plans’ funding deficit fell by $35 billion in June to $346 billion.

In all, the plans, at the end of June had $1.83 trillion in assets and $2.18 trillion in liabilities.

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