In June, 100 of the nation’s largest defined pensions experienced a collective $57 billion decrease in funded status, according to Milliman’s Pension Funding Index. A $20 billion rise in asset values could not keep pace with a $77 billion increase in pension obligations.
The $57 billion decrease in funded status, combined the decrease of $129 billion in April and May, accounted for the $186 billion decline in funding during the second quarter.
“With the help of the lowest discount rate in the 12-year history of our study, corporate pensions last month saw their funding deficit increase to a near-record $415 billion,” said John Ehrhardt, co-author of the Milliman Pension Funding Study. “This is the second worst deficit we’ve seen.”
In June, the discount rate used to calculate pension liabilities fell to 4.32% from 4.56%, raising the PBO to $1.698 trillion at the end of the month. The overall asset value for these 100 pensions increased from $1.263 trillion to $1.283 trillion.
Looking forward, if these 100 pensions were to achieve their expected 7.8% median asset return and if the current discount rate of 4.32% were to be maintained throughout 2012 and 2013, these pensions would improve the pension funded ratio from to 77.4% from 75.6% by the end of 2012 and to 82.0% by the end of 2013.
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