The financial markets’ poor showing in August left U.S. corporations’ defined-benefit pension plans even deeper in the red. And there are additional challenges on the horizon for DB plan funding, including the prospect that the Federal Reserve will try to bolster growth by pushing long-term rates lower. That could lower the discount rates companies use to measure pension obligations and increase the size of those obligations.
Mercer, the HR consulting company, estimates the aggregate pension deficit at S&P 1500 companies grew by $73 billion in August to total $378 billion. Pension plans took a double hit last month, with the sell-off in stocks eroding their assets at the same time the decline in interest rate caused their liabilities to grow.