The funded status of Standard & Poor’s 1,500 companies’ pension plans dropped 8 percent in September to an aggregate deficit of $300 billion, according to Mercer estimates.
The drop during a positive equity market was attributed to the declining yield on “high quality” corporate bonds that caused an increase in the value of pension plan liabilities.
The estimated aggregate value of pension assets of S&P 1,500 companies was $1.23 trillion as of September 30, with an estimate value of aggregate liabilities of $1.53 trillion.
Also, S&P 1,500 companies’ combined 2010 pension expense will be $41 billion if funded status remains unchanged—34 percent lower than the estimated 2009 expense of $55 billion.
In a separate Bank of America Merrill Lynch report, S&P 500 companies’ U.S. defined-benefit plans were 73 percent funded on average as of September 30, up from 71 percent on December 31, 2008.
That funded level amounts to an estimated aggregate deficit of $271 billion, John Haugh, research analyst, and credit portfolio strategists Michael Contopoulos and Robert Brega wrote in the report. All three are with Banc of America Securities.
Pension assets were up 12.8 percent for the first nine months of the year, but not enough to offset a 26-basis-point annual decrease in long-term AA-rated bond yields that help drive a 9.2 percent rise in pension liabilities.
The BofA Merrill Lynch Pensions & Endowments Monthly report estimates almost 75 percent of S&P 500 companies’ U.S. pension plans are less than 80 percent funded as of September 30.