The pension plan deficit of S&P 1500 companies grew $59 billion in the first half of 2012 to $543 billion, according to new data by Mercer. The funded ratio of these plans is 74 percent as of June 30, 2012, compared to a 75 percent funded ratio in December 2011, when the deficit was $484 billion.

Although U.S. equity markets rose by 4 percent during June as measured by the S&P 500 total return index, discount rates used to measure the pension liability fell by 24 to 32 basis points during the month, as measured by the Mercer Pension Discount Yield Curve. The yield curve hit an all-time low for the second consecutive month, due primarily to the Moody's action downgrading the credit ratings of 15 major banks on June 21, Mercer found. Because a number of the banks lost their AA credit ratings, they are now excluded from yield curves used to set pension accounting discount rates.

Plan sponsors benefited from Congress' passing of the Highway and Student Loan bill, which included a provision that will reduce the funding requirements for corporate plans, by establishing a corridor around the 25-year average of interest rates used to determine liabilities in the calculation of minimum contribution requirements. Plans that would otherwise fall below key funding thresholds will now have more time to improve the funding levels and avoid restrictions on their ability to pay some accelerated benefit forms, such as lump sums.

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