U.S. corporate pension deficits decreased $58 billion in August to $631 billion, according to new figures from Mercer. The deficit corresponds to an aggregate funded ratio of 72 percent as of Aug. 31, compared to a record low funded ratio of 70 percent as of July 31.

Even with the small rebound, the deficit in pension plans for S&P 1500 companies was still above 2011 levels, according to the Mercer report. U.S. equity markets rising over 2 percent during August and discount rates rising between 12 and 14 basis points helped spur the rebound. Rates had been at a record low at the end of July.

“Finally there is a bit of positive news after several months of setbacks,” said Jonathan Barry, a partner in Mercer’s Retirement Risk and Finance consulting group. “However, the overall deficit is still troubling. If these deficits persist through year end, plan sponsors will be looking at higher year-end balance sheet deficits, cash contributions and P&L expense for 2013.”

Guidance on funding relief under MAP-21, issued by the IRS in August, gives sponsors more clarity on their cash requirements for 2012 and 2013, “The IRS finalized the interest rates for 2012 funding calculations, and most sponsors will have an opportunity to lower near-term contribution requirements,” said Barry. ”However companies should remain cognizant of the true deficit they are facing, and may want to contribute more than these new requirements to help address this shortfall.”

The estimated aggregate value of pension plan assets of the S&P 1500 companies at Dec. 31, 2011, was $1.45 trillion, compared with estimated aggregate liabilities of $1.93 trillion. Allowing for changes in financial markets through the end of August 2012, changes to the S&P 1500 constituents and newly released financial disclosures, the estimated aggregate assets were $1.59 trillion, compared with the estimated aggregate liabilities of $2.22 trillion as of Aug. 31, 2012.

Mercer is a global leader in human resource consulting and related services. The firm works with clients to solve their most complex human capital issues by designing and helping manage health, retirement and other benefits.

Instant Insights /

U.S. corporate pension deficits fell by $58 billion in August

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