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Contact: Mercer Feedback

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United States
New York , 8 March 2010

As economic indicators continue to show mixed signs of economic recovery, the financial position of pension plans remained unchanged in February. Based on the latest figures from Mercer¹ the funded status of pension plans sponsored by the S&P1500 companies was 83 percent at the end of February, unchanged from the position at the end of January. This is equivalent to a deficit of $256 billion at the end of February compared with a deficit at the end of January of $263 billion. The 2009 year-end deficit was $247 billion, corresponding to a funded status of 84 percent.

The funded status stability reflects relatively benign market conditions in February. However, plan sponsors continue to work towards adopting investment strategies that are more closely linked to their liabilities. For financial year ends on or after December 31, 2009 new disclosure rules from the Financial Accounting Standards Board (FASB) will require plan sponsors to provide more detail and descriptive information about their pension plan asset allocations and investment strategies.  Previously plan sponsors’ asset allocation disclosures provided only a split of assets among the broad categories of equities, fixed Income, real estate or other.

“As companies employ more sophisticated investment strategies such as interest rate swaps or synthetic long duration bonds, the enhanced disclosures could give analysts a better indication of the degree to which a plan sponsor is hedging pension plan risk. Greater risk management increases the stability of the plan sponsor’s earnings which may be considered by analysts in their share price valuations,” said Adrian Hartshorn, a partner in Mercer’s Financial Strategy Group.

Mercer estimates the aggregate combined funded status position of plans operated by S&P 1500 companies on a monthly basis. Figure 1 shows the estimated aggregate surplus/deficit position and the funded status of all plans operated by companies in the S&P 1500. This is based on projections of their reported financial statements² adjusted from each company’s financial year end to February 28 in line with financial indices. This includes US domestic qualified and non-qualified plans and all non-domestic plans. The estimated aggregate value of pension plan assets of the S&P 1500 companies at December 31, 2009, was $1.25 trillion, compared with estimated aggregate liabilities of $1.50 trillion. Allowing for changes in financial markets though the end of February 2010, changes to the S&P 1500 constituents, and newly released financial disclosures, the estimated aggregate assets were $1.25 trillion, compared with the estimated value of the aggregate liabilities of $1.51 trillion.

Notes for Editors

Unless otherwise stated, the calculations are based on the Financial Accounting Standard (FAS) funding position and include analysis of the S&P 1500 companies.

Information on the Mercer Yield Curve is available at: www.mercer.com/pensiondiscount

About Mercer

Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges.

 For more information, visit www.mercer.com.

Figure 1.

Source: Mercer, March 1, 2010.

Sample Data Points:

1. Figures provided by Mercer Investment Consulting Inc.
2. Source of Financial Statement Data: Standard & Poor's, a division of The McGraw-Hill Companies, Inc
3. Assumed duration of approximately 10 years. Based on Mercer Yield Curve mature plan index rate.
4. Includes price changes only; total returns also include dividends.

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