Public pension assets rebound by 7.34% in Q1 2019, funding improves by $185 billion

Milliman today released the first quarter (Q1) 2019 results of its Public Pension Funding Index (PPFI), which consists of the nation’s 100 largest public defined benefit pension plans. In Q1 2019, these plans experienced a $185 billion jump in funding, largely due to stellar investment gains of 7.34% in aggregate. 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. 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 2019, 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, click here.

Also, to receive regular updates of Milliman’s pension funding analysis, contact us here.

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