The combined funded status of the 100 largest U.S. corporate pension plans studied by Milliman fell 2.3 percentage points in June as liabilities continue to mount from a declining discount rate, according to the actuary's monthly report.
The funded status as of June 30 was 75.6%, down from 77.9% at the end of May and 78.7% at the end of 2011.
The aggregate deficit increased $57 billion in June to $415 billion, the second largest deficit in the 12-year history of the report.
The discount rate fell 24 basis points to 4.32%, the lowest ever for the Milliman 100 Pension Funding Index. The drop was fueled by Moody's downgrade of five major financial institutions that had previously been in the Citigroup Pension Liability Index.
Pension liabilities increased $77 billion to $1.7 trillion in June, while pension assets increased $20 billion to an aggregate $1.28 trillion. Investments returned 1.72% for the month, but were down 0.68% for the second quarter.
For the quarter, the discount rate decreased 56 basis points while the funded status plunged nearly 10 percentage points from 85%.
However, corporate plans will see some relief from the newly enacted highway law that allows a 25-year average of interest rates used to determine liabilities in the calculation of contributions. “We estimate (the law) will result in a 100- to 125-basis-point increase in the effective interest rate used in the calculation of the funding target liability for 2012 plan years,” the report states. “For the Milliman 100 companies, we estimate that this could result in a funding target liability decrease of $210 billion to $250 billion.” However, it is not clear if the new rules will change plans' 2012 contributions.