Funding Ratio of S&P 1500 DB Plans Down in March
The funding ratio of DB benefit plans sponsored by employers in the S&P 1500 offer fell slightly in March. Mercer found that the funding ratios of those companies’ DB plans slipped to 85 percent; it had been 87 percent in February.
Mercer attributes the drop not to a dip in the U.S. economy, but to further adjustments to estimates it had made earlier concerning actual funding ratios in the year-end Forms 10-K those employers filed. Without the figures from those filings, Mercer says, the funding ratio would have stayed the same.
“This month is a reminder of the various factors that can affect the funded status of pension plans,” said Jim Ritchie, a principal in Mercer’s retirement business, in a press release. “We are starting to see the potential impact of new mortality standards on a plan sponsor’s balance sheets. This is creating an increased interest from plan sponsors in risk transfer strategies, such as annuity purchases of lump sum cashouts in 2014. The first quarter of 2014 has reminded us how quickly the funded status of a pension plan can change, creating the need for a well-developed dynamic investment policy and overall risk strategy to take advantage of opportune market conditions,” he added.
Mercer estimates that by March 31, aggregate pension funds stood at $1.83 trillion, with projected benefit obligations at $2.16 trillion. As of Feb. 28, those figures were $1.86 trillion and $2.13 trillion respectively. Data from the Investment Company Institute show a sharper decline since the end of 2013. On March 26, ICI reported that private defined benefit plan assets had grown to $2.9 trillion by the end of 2013.
John Iekel is Senior Writer at ASPPA, as well as Editor of the ASPPA Net and NTSA Net web portals.