S&P 1500 Pension Plan Funding at Highest Point Since 2008

Constant talk of underfunded pensions and municipal bankruptcies does little to quell anxiety in the topsy-turvy market, but a new report from research and consulting firm Mercer could lessen fears.

It finds funding levels of pension plans sponsored by S&P 1500 companies continued a strong rebound in 2013, with the aggregate deficit decreasing by $10 billion during the month of July to $212 billion. While deficits in the billions might seem worrisome, it’s actually the lowest level since the economic crisis first hit in 2008.

Equity markets staged a strong performance during the month with the S&P 500 index rising 5.1%. However, discount rates dropped back slightly in July after sharp increases in May and June, dampening the improvement slightly.

According to Mercer analysis, an estimated 17% of plan sponsors had assets in excess of their pension obligations as of July 31, compared to only 4% at Dec. 31, 2012. Mercer also estimates that if discount rates rose another 1%, the number of sponsors with fully funded pension obligations could exceed 40%.