Corporate Pension Funding Improved By 9 Percent in June

Corporate pension assets are at an all-time high, and June brought more good news for the companies with defined benefit plans: corporate pension funding increased by 9 percent last month according to Mercer.

From the Wall Street Journal:

The overall pension deficit among companies in the Standard & Poor’s 1500-stock index, which tracks the broad market, fell by $35 billion, or more than 9%, to $346 billion, Mercer said. That estimated deficit is now $158 billion narrower than where it ended last year.

[…]

Behind the move is an increase in the discount rate, a hypothetical yield on a portfolio of high-grade bonds, by 29 basis points to almost 4.3%, according to Mercer. As discount rates rise, companies can assume a better return on assets over time, which narrows any gap between what pensions expect to return and what covered employees will ultimately be owed.

“We now have the highest discount rates we’ve seen since late 2013,” said Matt McDaniel, a partner with Mercer’s retirement business.

Mercer said the funded status would have been even better if not for the volatility and uncertainty surrounding the Greek debt crisis.

The funding improvement happened despite the S&P 500 falling over 2 percent over the same period.

Photo by www.SeniorLiving.Org via Flickr CC License