Pension funding hit by February stock market decline

Hit by a drop in the equity markets and falling interest rates, the funded status of pension plans sponsored by large U.S. employers dipped in February, Mercer L.L.C. said Thursday.

On average, pension plans sponsored by companies in the S&P 1500 were 78% funded as of Feb. 28, down from 79% as of Jan. 31 and 83% as of Dec. 31, Mercer said in an analysis.

Falling interest rates, which increase the value of plan liabilities, have been a key factor in the decline in pension plan funding.

“Even though the S&P 500 index has more than doubled from December 31, 2008, interest rates have declined about 230 basis points over the same period, keeping the funded status of the S&P 1500 pension plans below 80%,” said Jim Ritchie, a principal in Mercer’s Baltimore office.

In aggregate, Mercer found that the plans’ funding deficit increased by $15 billion to $487 billion in February, up from a $472 billion deficit at the end of January and a $404 billion deficit at the end of 2015.

In all, the plans at the end of February had $1.74 trillion in assets and $2.22 trillion in liabilities.