Reuters | January 7, 2009

NEW YORK (Reuters) - Volatile markets have saddled U.S. companies with a $409 billion deficit on pension plans, reversing a $60 billion surplus a year earlier, and will cut into earnings in 2009, consulting firm Mercer said.

As of December 31, pension plans among members of the Standard & Poor's 1500 had $1.21 trillion of assets and $1.62 trillion of liabilities, Mercer said in a report released on Wednesday. At the end of 2007, pension plan assets totaled $1.66 trillion and liabilities totaled about $1.6 trillion, Mercer said.

The S&P 1500 is a broad portfolio representing large-cap, mid-cap and small-cap segments of the U.S. equity markets.

The shortfall suggests that more companies will have to pump cash into their pension plans to ensure they can meet their commitments to retirees.

Mercer estimated pension expenses will increase to about $70 billion this year from $10 billion in 2008, reducing overall profitability by about 8 percent.

"The decline in funded status will be capitalized and reflected in corporate balance sheets for many companies," Adrian Hartshorn, a member of Mercer's financial strategy group, said in a statement.

He said this will reduce balance sheet strength and could affect companies' ability to make capital expenses, meet loan covenants and preserve their credit ratings.

Mercer is a unit of New York-based Marsh & McLennan Cos Inc (NYSE:MMC - News), which also runs a large insurance brokerage.

(Reporting by Jonathan Stempel; Editing by Andre Grenon)