The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 1 percent in May 2023 to 103 percent as a result of an increase in discount rates. As of May 31, 2023, the estimated aggregate surplus of $51 billion USD increased by $22 billion USD as compared to a surplus of $29 billion USD measured at the end of April according to Mercer,1 a global consulting leader and a business of Marsh McLennan (NYSE: MMC).
The S&P 500 index increased 0.25 percent and the MSCI EAFE index decreased 4.76 percent in May. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased from 4.88 percent to 5.15 percent.
“Pension funded status for the S&P 1500 rose in May driven by discount rate increases,” said Scott Jarboe, a Partner in Mercer’s Wealth Business. “Pension funded status saw a modest increase in May as interest rates rose on another Fed rate hike despite inflation continuing to cool. The domestic equity market has remained in a holding pattern as of late with investors keeping a close eye on the national debt ceiling negotiations. So far, pension funded status levels have held relatively steady this year and risk transfer continues to be a popular strategy many plan sponsors are now executing.”