Reports continue to relate the fall in funded status of U.S.corporate pensions, with Milliman Inc. reporting a $46 billion decrease in June— thanks likely to Brexit — and the BNY MellonInstitutional Scorecard reporting a 4.0 percent surge inliabilities during the month, along with heightened volatility.

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Mercer hadalready put a 3 percent drop in fundedstatus among the plans of S&P 1500 companies downto Brexit, and Milliman’s latest pension funding index chalked upthat $46 billion drop primarily to a $54 billion increase inpension liabilities. Investment gains, Milliman said, partiallyhelped to offset the funded status decline.

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The funded ratio for the 100 largest U.S. corporate pension plans, it said,decreased from 77.5 percent to 75.7 percent at the end of June.Having passed the midpoint of 2016, the funded status deficit hasballooned to $447 billion, a $140 billion increase over the pastsix months, the firm said. Why? A combination of Brexit and anoverall discount rate drop of 71 basis points.

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But Milliman doesn’t see the whole picture as bleak. “Plans withfiscal years ending June 30th had a late-breaking surprisewith the passage of Brexit. Falling 23 basis points, U.S. discountrates certainly weren’t immune to the Brexit pain,” Zorast Wadia,coauthor of the Milliman 100 PFI, said in a statement.

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Wadia added, “The silver lining here lies with fixed incomeinvestments, which benefited from the discount rate decline. Thosewith heavy allocations towards fixed income are seeing investmentgains.”

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In fact, Milliman projects “under an optimistic forecast withrising interest rates (reaching 3.75 percent by the end of 2016 and4.35 percent by the end of 2017) and asset gains (11.2 percentannual returns), the funded ratio would climb to 81 percent by theend of 2016 and 93 percent by the end of 2017.” However, it alsocautioned that, with a pessimistic forecast that sees a 3.15percent discount rate at the end of 2016, 2.55 percent by the endof 2017 and 3.2 percent annual returns, the funded ratio woulddecline to 72 percent by the end of 2016 and 66 percent by the endof 2017.

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BNY Mellon, for its part, reported that the funded status oftypical U.S. corporate defined benefit plans fell by 2.1 percent inJune to 78.1 percent. “The slide,” it said in a statement,“represents the lowest month-end funded status yet for U.S.corporate DB plans in 2016. Asset growth of 1.5 percent was notenough for plan sponsors to outpace rising liabilities — whichincreased by 4.0 percent in June, after the EU Referendum voteshook global markets.”

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Year-to-date, for typical U.S. corporate DB plans, BNY Mellonsaid that assets are up 6.5 percent, compared to a 13.85 percentincrease in liabilities for plan sponsors. On a 12-month basis,liabilities outpaced asset growth more than fourfold, increasing16.96 percent versus 4.07 percent, respectively. It estimated thatthe S&P 500 pension deficit has increased by $61 billion inJune, to $495 billion.

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