Corporate pensions’ funded status improved by $25 billion inJune, according to Milliman Inc., on rising interest rates.

In spite of a $10 billion investment loss, the Pension FundingIndex, which analyzes the 100 largest corporate defined-benefitplans, found a $35 billion liability reduction actually reduced thedeficit to $186 billion from $211 billion at the end of May2011.

"Normally when assets decline we're in for a fall in pensionfunded status, but not this month," John Ehrhardt, co-author of theMilliman Pension Funding Study, said in a press release. "In factit's a rare combination: a funded status improvement driven byliabilities and in spite of a decline in assets.”

Ehrhardt noted that in 11 years of tracking pension data, thatcombination has only happened in a total of 10 months.

For the three months prior to June, investments in corporate pensions gained over 1%, but the funded status fell$14 billion on a drop in net interest. Assets gained 15% over thelast 12 months, and funded status has improved by $182 billion.

Milliman notes that if the Index companies achieve an 8% medianasset return, and maintain a discount rate of 5.43% through 2013,the pension deficit could fall to $34 billion by the end of2013.

A more optimistic forecast that assumes asset gains of 12% andinterest rates of nearly 7% by the end of 2013 found the fundedratio would climb to 110% by the end of 2012 and 129% by the end of2013. Milliman’s negative outlook predicted the funded ratio couldfall to 78% by the end of 2012 and 72% by the end of 2013 if annualreturns are just 4% and the discount rate falls to 4% by the end of2013.