U.S. Pension Funded Status Deficit Drops $81 Billion in 2nd Quarter of 2015

Stronger Interest Rates, Decreases in Plan Liabilities Were Key Factors, According to Aon Hewitt

News provided by

Jul 07, 2015, 10:49 ET

LINCOLNSHIRE, Ill., July 7, 2015 /PRNewswire/ -- The funded status of U.S. pension plans improved in the second quarter of 2015, with the deficit declining by $81 billion for the quarter, according to an analysis by Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON).

According to the Aon Hewitt Pension Risk Tracker, which evaluates daily funded status for S&P 500 companies with defined benefit pension plans, second quarter aggregate pension funded status reached 83.4 percent, up from 80.7 percent in the first quarter of 2015.

"As interest rates improved over the quarter, overall plan liabilities decreased, leading to better funded status for U.S. pension plans," said, Ari Jacobs, Global Retirement Solutions leader at Aon Hewitt. "Moving into the second half of the year, pension plan sponsors will need to keep a watchful eye on changes to interest rates, which could cause volatility in funded status."

Funded status gains were largely driven by an estimated asset reduction of $57 billion, which was outpaced by a $138 billion reduction in liabilities year-to-date. Aon Hewitt's analysis also showed that 10-year Treasury notes were up over the quarter (0.41 percent) and credit spreads widened to 0.17 percent, resulting in a 0.58 percent increase in the discount rate for the quarter for the average pension plan.

Other key findings:

Return-seeking assets appreciated with the Russell 3000 Index returning 0.1 percent.
Bonds were significantly outperformed by equities, with the Barclay's Long Gov/Credit Index returning -7.6 percent.
Pension assets returns were down 2.1% over the quarter.

About Aon
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 69,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com.

Follow Aon on Twitter: https://twitter.com/Aon_plc
Sign up for News Alerts: http://aon.mediaroom.com/index.php?s=58

Media Contact:
MacKenzie Lucas, 847.442.2995, [email protected]

Logo - http://photos.prnewswire.com/prnh/20100719/AQ37264LOGO

SOURCE Aon plc