One effect of the 2013 bull market was that it left defined benefit corporate pensions in the best financial shape in years, but by the end of 2014 those gains had already started to decline with aggregate funding dropping nine percentage points, reports consulting firm Towers Watson.

“Despite a rising stock market in 2014, funding levels for employer-sponsored pension plans dropped back to what we experienced just after the financial crisis,” said Alan Glickstein, a senior retirement consultant at Towers Watson. “A one-time strengthening of mortality assumptions alone is responsible for about 40% of the increased deficit.”

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Total funding deficit more than doubled in 2014

Towers Watson looked at data for the 411 companies in the Fortune 1000 that have U.S. tax-qualified defined benefit pension plans and a fiscal year that ends in December, and found that in absolute terms the aggregate funding deficit for those companies jumped from $162 billion at the end of 2013 to $343 billion at the end of 2014. Pension plan assets grew 3% last year, from $1.36 trillion to $1.4 trillion over the course of the year, which reflects 9% returns on underlying investments and $30 billion in contributions from corporate sponsors, 29% less than was contributed in 2013.

DB pension funding: Two systemic factors behind the change

A big part of the change was simply updated mortality tables (since people are expected to live longer, DB pension plans will have to make more payments down the road), and Towers Watson consultant Dave Suchsland said that the Society of Actuaries’ study of mortality assumptions in pension plans was “the most significant pension event of the year.”

The other significant factor was that interest rates fell even further, which causes liabilities to go up because future liabilities aren’t discounted as heavily. Pension funds that followed liability-driven investment strategies fared better because the appreciation of their larger bond positions offset the increased liabilities caused by a falling discount rate. If the Fed does hike rates this year, as many expect, funding levels for DB pensions as a whole should go back up in response, though again LDI strategies will be less impacted. But if the bull market finally loses steam, even a more forgiving discount curve won’t be enough to bring funding levels back up.