A new Mercer study says the solvency position of Canadian defined benefit pension plans improved in 2012.

Mercer said Wednesday that its Pension Health Index stood at 82% on Dec. 31, up two percentage points for the fourth quarter and up six percentage points for the year.

However, the global pension, health and investment consultancy said economic factors were largely a non-factor.

Most of the improvement was due to increased employer contributions to fund deficits.

“The good news is that the financial position of Canadian pension plans improved during 2012,” said Manuel Monteiro, partner in Mercer’s financial strategy group.

“The bad news is that plan sponsors had to do most of the heavy lifting,” added Monteiro, who noted that economic factors contributed only one percentage point to the improvement.

The Mercer Pension Health Index shows the ratio of assets to liabilities for a model pension plan with valuations filed on a calendar-year basis.

Among other things, it assumes a 50-50 split between active and retired members, contributions equal to current service cost, no plan improvements and special payments to fund deficits over a five-year period.

It also assumes a passive portfolio with asset mix of 42.5% DEX Universe Bond Total Return Index, 25% S&P/TSX Composite, 15% S&P 500 (Canadian), 15% MSCI EAFE (Canadian) and 2.5% DEX 91 day Treasury bills.

Monteiro said that 2012, after a “devastating 2011,” was not the bounce-back year that pension plan sponsors had hoped for.

“We estimate that only about one in 20 pension plans are fully funded on a solvency basis as of Dec. 31,” he said.

“This will translate into higher cash funding requirements over the next few years, although this impact could be deferred through the use of temporary funding relief legislation as well as the use of letters of credit.”