Public pensions bounced back fairly nicely early this year from a dismal end of 2018, according to a new study released in late May.
Milliman, Inc.’s first quarter 2019 results of its Public Pension Funding Index (PPFI), which consists of the nation’s 100 largest public defined benefit pension plans, showed these plans experienced a $185 billion jump in funding in Q1 2019, largely due to stellar investment gains of 7.34% in aggregate.
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This improvement was the largest quarterly funding increase since the PPFI began in September 2016 and helped offset Q4 2018’s investment losses, which marked the PPFI’s largest quarterly decrease at $306 billion.
Estimated investment returns for plans in the first three months of 2019 ranged from a low of 3.52% to a high of 11.57%. As a result, the funding ratio of the Milliman PPFI climbed from 67.2% at the end of December to 71.0% as of March 31, 2019.
“The first quarter of 2019 was a welcome relief for public pensions after the dismal investment performance at the end of 2018,” said Becky Sielman, author of the Milliman 100 Public Pension Funding Index. “But even with the market fluctuations of the past six months, it’s important to bear in mind that these pensions have time horizons measured in decades. Plan sponsors should take this volatility as a reminder to review their asset smoothing policies, to ensure the short-term market fluctuations don’t translate into short-term contribution volatility.”
As of March 31, 2019, the PPFI deficit stands at $1.508 trillion compared to $1.693 trillion at the end of December 2018. The total pension liability (TPL) continues to grow, and stood at an estimated $5.205 trillion at the end of Q1, up from $5.164 trillion at the end of Q4 2018.
Funded ratios overall moved higher this quarter, with six plans moving above the 90% funded mark; there are now 14 plans above this mark compared to eight at the end of 2018.
To view the Milliman 100 Public Pension Funding Index, go to http://www.milliman.com/ppfi/.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
