Among all asset classes, the average return was nearly 20 percent in 2019, according to Willis Towers Watson analysis. U.S. large-cap equities returned 32 percent.

Even bonds delivered in response to rate cuts from the Federal Reserve. In the aggregate, bonds returned 9 percent, with corporate and longer-term government bonds, which pension sponsors often use when implementing liability-driven investment strategies, returning 23 percent and 15 percent, respectively.

Yet the aggregate funded ratio of the plans realized a mere 1 percent bump.

The 100-basis-point decrease in the discount rate was the largest single-year drop in two decades, said Gamzon. That largely explains why aggregate pension obligations increased 9 percent, from $1.58 trillion to $1.72 trillion by the end of the year.

Pension smoothing set to phase out beginning in 2021

The investment gains in 2019 were the strongest pension sponsors have experienced since 2003, according to WTW.

"It was a knock-it-out of the park type of year on the investment side, but pensions are a two-sided game," noted Gamzon.

The total funding deficit of the 376 plans is $216 billion, down $6 billion from the end of 2018. Contributions to plans were down from 2018, when sponsors rushed to fund plans beyond minimum required contributions to realize higher write-offs on the heels of 2017's tax reform bill.

The 87 percent aggregate funded ratio is vastly improved from the financial crisis, when it plummeted to 77 percent, but still a far cry from the 106 percent funded ration in 2007.

This year is scheduled to be the last that sponsors will have to take advantage of so-called pension-smoothing calculations that artificially decrease plan liabilities, in turn lowering annual contribution requirements.

Congress passed a more forgiving way of calculating plan liabilities in 2012, and again in 2014, as a way to give pension sponsors relief as they continued to recover from the financial crisis, explained Gamzon.

Under that relief, sponsors could calculate the corporate bond rate at 90 percent of the 25-year average.

In 2021, that is scheduled to drop to 85 percent of the 25-year average, and then ultimately to 70 percent by 2024.

"This will be significant for many companies," said Gamzon. "At 70 percent the impact of the relief will be mostly gone."

In real terms, WTW is expecting a 150 basis point decrease in the discount rate by the time the smoothing allowances expire. That would translate to an increase of 15 percent to 20 percent of a plan's obligations.

"That's pretty significant," said Gamzon.

Increased liability calculations could translate to higher minimum funding requirements, particularly if returns on investments slow. Moreover, as pensions have recovered over the past decade, more have dovetailed to liability-driven investment strategies that overweight allocation to fixed income. That means less cash is available to pursue aggressive returns in riskier equities.

"Most companies now have a more significant portion of their assets in fixed income than ever before. If that part of the portfolio is averaging 3 percent return or less, it will be tough to keep an overall return assumption rate at 6 or 7 percent," said Gamzon.

For the most part, large sponsors are aware of the headwinds, said Gamzon. While one option would be to lobby Congress to extend the pension-smoothing calculus in place today, he has not heard much effort to that end.

Sponsors may also want to accelerate contributions to plans to offset increased premiums to the Pension Benefit Guaranty Corp. that will come as liabilities increase in 2024, he said.

"Plans will pay more for their liabilities starting next year, or you can hope you can earn your way out of the increases," he said.

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