For the third consecutive year, the funded status of pension plans sponsored by large employers has dropped, according to an analysis released Thursday.

On average, pension plans sponsored by companies in the S&P 1500 were 74% funded at year-end 2012, according to New York-based Mercer L.L.C. That's down from year-end 2011, when plans were an average of 75% funded; year-end 2010, when plans were on average 81% funded; and year-end 2009, when plans on average were 84% funded.

In the aggregate, the plans' funding deficit hit a record $557 billion as of Dec. 31, 2012, up from $484 billion as of Dec. 31, 2011, according to the analysis.

The drop in plans' funding status was largely fueled by the decline in interest rates, which drove up the value of plan liabilities, Mercer executives said.

“Despite U.S. and non-U.S. equity indices outperforming expectations, interest rates on high-quality corporate bonds declined by more than 80 basis points in the calendar year, driving discount rates down and plan liabilities up significantly, with the overall result a significant decline in funded status for most plans,” said Jonathan Barry, a Boston-based partner with Mercer's retirement consulting group, in a Mercer statement.

While plans' funded status slumped in 2012, funding levels were extraordinarily volatile during the year, the Mercer analysis showed. The aggregate funded status peaked at about 82% at the end of March, only to fall to 70% at the end of July, which was the biggest month-end deficit since Mercer began to track such information, according to the analysis.

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Amid that volatility, more employers are taking steps to mitigate the impact of that volatility on their balance sheets and cash funding requirements, said Richard McEvoy, leader of Mercer's financial strategy group in Pittsburgh, in the Mercer statement.

For example, about a dozen corporations announced they were offering certain plan participants the opportunity to convert their monthly annuities to a cash lump-sum payment.

In addition, General Motors Co. and Verizon Communications Inc. announced they were transferring billions of dollars of pension plan obligations through the purchase of huge group annuities from Prudential Insurance Co. of America.

“We anticipate this trend will continue in 2013 and beyond, as corporate defined benefit plan sponsors are becoming more focused on risk management issues and many are poised to make significant changes,” Mr. McEvoy said.