Pension funding levels down from '09: Mercer

Aided by a strong rebound in the equities markets, the funded status of pension plans sponsored by large employers has rebounded from a few months ago but remains lower than a year ago, according to an analysis released last week.

On average, pension plans sponsored by companies in the S&P 1500 were 81% funded at year-end 2010, with a deficit of $315 billion. That's down from year-end 2009, when plans were an average of 84% funded with a shortfall of $229 billion, New York-based Mercer L.L.C. estimated.

While funding levels are lower due to a slight decline in interest rates compared with year-end 2009, plan funding levels have surged in recent months.

As recently as Aug. 31, plans on average were just 71% funded, their lowest point in 2010. But due largely to a rebounding stock market, funding levels have improved steadily since then.

“We certainly saw a marked improvement in funded status over the last quarter, as equity returns and discount rates both moved favorably for plan sponsors,” Jonathan Barry, a Mercer partner in Boston, said in a statement.

While plan funding levels are improving, they have a long way to go to reach levels of just a few years ago.

At year-end 2007, plans were 104% funded on average. One year later, the average funding level sank to 75% due to the 2008 equities markets crash.

The Mercer study is based on the 729 companies in the S&P 1500 that sponsor defined benefit plans with enough data for analysis.