The funded status of corporate defined benefit plans of S&P 1500 companies improved in December, but not enough to keep them from having what Mercer said was the highest year-end funding deficit ever.
The S&P 1500 companies' funding ratio increased to an aggregate 74% as of Dec. 31, up from 72% a month earlier but down from 75% as of Dec. 31, 2011.
Estimated aggregate assets of the plans were $1.59 trillion as of Dec. 31, compared to estimated aggregate liabilities of $2.14 trillion, for a total pension funding deficit of $557 billion, up $73 billion from the previous year.
“In December, things actually improved a little because we had reasonably good returns in December and discount rates increased very slightly for the month,” said Jonathan Barry, a partner in Mercer's retirement risk and finance consulting group. “We did get a little bit of an improvement in the overall funded status.”
Overall, 2012 was a very up-and-down year, said Mr. Barry. “Looking at the whole year, it was another year with a lot of volatility,” he said. “We started at 74(% funded), got up into the low 80s, down to 70, then back to around 74 at the end. It was really quite a bumpy ride through the year.”
For the year, while asset growth was healthy, particularly in the broad U.S. equity market with a year-end return of about 16%, falling interest rates contributed to higher liabilities. The discount rate fell by 84 basis points in the calendar year, to 3.71% from 4.55%.