Estimates of the critical funding levels of pension plans fell 2% in March to just 85%, an unexpected trend given the strength of the markets and stability of interest rates.
The decline in the funding levels of pension, found by pension tracker Mercer, was largely the result of adjustments made by Mercer based on pension data from year-end financial statements. These new numbers show that in the universe of companies Mercer evaluated, those in the Standard & Poor’s 1500, asset values were lower than previous estimates. Meanwhile, liabilities rose as some pension plan sponsors started using more conservative assumptions in their calculations. Also looming are changes in mortality standards which might also affect funded status.
The decline in the funded level continues a distressing downward trend since the end of 2013. However, the funded status of pensions has improved dramatically since mid-2011, before stocks enjoyed the most recent leg up in their rally.
“The first quarter of 2014 has reminded us how quickly the funded status of a pension plan can change,” says Jim Ritchie, a principal in Mercer’s retirement business.
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