The growing weight of pension obligations is forcing more corporations to take dramatic steps to lighten the load. Recently, companies including Ford Motor Co. , General Motors Co. , Verizon Communications Inc. and AT&T Inc. have announced moves involving billions of dollars to deal with funding gaps that have opened up in their defined-benefit plans, which guarantee set payments to retirees.

Goldman Sachs Asset Management pension strategist Michael Moran Goldman Sachs

According to actuarial consulting firm Milliman Inc., the 100 largest defined-benefit corporate pension plans were underfunded by $453 billion at the end of September, a 30% increase from a year earlier. And with the Federal Reserve expected to keep interest rates low until at least 2015, few are expecting the pension deficits to close soon.

Low interest rates hurt pension funds in two ways. First, they limit investment returns. Second, companies calculate the present value of their future pension liabilities using a so-called discount rate, which is based on corporate-bond rates. A lower rate means higher liabilities.

While potentially painful in the short-term, moves to address their pension shortfalls, such as shifting billions of dollars of obligations to insurance companies, as both GM and Verizon have done, or offering lump-sum payments to retirees, which Ford did over the summer, could help companies in the long term.

In an interview with The Wall Street Journal, Michael Moran, a pension strategist with Goldman Sachs Asset Management, a unit of Goldman Sachs Group Inc., discussed how pension problems developed and how companies are thinking about solving them. Here are edited excerpts.

So Big

WSJ: Why have corporate pension deficits gotten so large in recent years?

MR. MORAN: The biggest challenge for pension plans and their sponsors has been the low-interest-rate environment. Low interest rates have inflated the present value of future benefit payments, making those obligations higher than they have been in the past, and therefore lowering the funded status of those plans.

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WSJ: What about the asset returns?

MR. MORAN: Asset returns have actually been quite good: 2012 is on track to be the third year out of the last four when corporate [pension] plans in aggregate will have higher actual returns than their expected returns. So low-funded levels have not been due to poor asset returns or poor contributions, they've been largely the function of the low-interest-rate environment.

WSJ: When did the increase in pension deficits start happening?

MR. MORAN: We're going through a multidecade decline in interest rates, which has hurt the calculations of funded status. However, as recently as 2007, corporate plans in aggregate were overfunded, and the low interest rates of the last few years have certainly contributed to the decline in funded levels that we see today.

WSJ: What are some strategies companies are using to shrink these pension deficits?

MR. MORAN: We've seen a number of strategies undertaken by plan sponsors. Some have shifted asset allocation to more of a dynamic framework, where asset allocation changes as funded status changes. Simplistically, this involves increasing allocations to fixed income as funded levels rise as a way to lock in that funded status.

More recently, we have seen plans instituting lump-sum options to their participants as a way to shrink their gross pension obligations. We've also seen some plans enter into annuity contracts with some insurance providers as another way of moving the liability off their books.

Finally, we've also seen a number of plan sponsors making voluntary contributions, taking advantage of the record amount of cash that's on corporate balance sheets, as a way to help improve funded levels.

Balance Sheets

WSJ: Talk to me about some of the volatility that pension plans introduce to corporate balance sheets.

MR. MORAN: We think about the way these plans affect company financials in three ways.

From a balance-sheet perspective, the actual funded status of the plan is calculated and reflected on the balance sheet at the end of each year, so you see funded-status volatility directly impacting the balance sheet.

From an income-statement perspective, changes in funded status get reflected in [profit and loss statement] over time, and given the decline in funded levels of the past few years, that has resulted in increased recognition of pension-related expenses.

Finally, to the extent companies are required or voluntarily decide to put money into the plan, that is a cash-flow event for the corporation and will be reflected through cash activities.

WSJ: What can companies do to eliminate or reduce the volatility once they've succeeded in shrinking the pension deficits?

MR. MORAN: Liability-driven investing is a popular trend in the corporate-pension universe over the past several years. Since liabilities for these plans are based on high-quality corporate-bond interest rates, by investing in high-quality fixed income, they can essentially match the characteristics of their assets with the characteristics of their liabilities. So as interest rates rise and fall, assets and liabilities rise and fall in tandem, therefore minimizing the funded status volatility.

WSJ: What do these moves mean for employees and even investors?

MR. MORAN: For employees, we've seen a multidecade trend of corporations closing and freezing their plans, and actions such as liability-driven investing and offering lump sums are another tool in the toolbox to "de-risk" those plans.

From a participant perspective, this just continues the multidecade shift that we've seen from being covered by a defined-benefit plan through their corporate employer and moving more toward a defined-contribution scheme where the investment responsibility is up to the individual.

For investors, as part of these shifts and de-risking activities, this has led to more corporate plans investing in high-quality fixed income. So the key issue is: How is all this demand for high-quality fixed income by just the corporate-pension universe going to affect the fixed-income markets?

Mr. Monga is a staff reporter for The Wall Street Journal in New York. He can be reached at reports@wsj.com.