DB Plan Funding Improvement Continues ’17 Trend

By John Iekel • December 14, 2017 • 0 Comments
Pension plans’ funded status provided something else to be thankful for in November, according to two recent reports.

Northern Trust Asset Management and Mercer report that the average funded ratio for U.S. pension plans rose by 0.4 percentage points to 83.4% in November, according to Chief Investment Officer. In addition, say Northern Trust and Mercer, the November results are part of a longer-term trend in 2017: the average funded status has improved by 3.4 percentage points since Jan. 1, when it stood at 80%.

The November improvement, they say, is due to an increase in the returns from the global equity market that outstripped a slight drop in the average discount rate. Similarly, Northern Trust and Mercer attribute the positive 2017 results to strong asset returns that “more than compensated” for lower discount rates, Chief Investment Officer says.

Additional data from Mercer lends further credence to the November improvements. It reports that the estimated aggregate funded status of Standard & Poors (S&P) 1500 companies’ pension plans improved by 1% to 84% in November, with their aggregate deficit dropping by $28 billion. And, as Northern Trust and Mercer reported, Mercer says that the trend for the S&P 1500 plans’ is positive for 2017 as well: It reports a collective drop in their deficit by $49 billion since Jan. 1.