Milliman today released the second quarter 2019 results of its Public Pension Funding Index (PPFI), which consists of the nation’s 100 largest public defined benefit pension plans. In Q2 2019, these plans experienced a $50 billion jump in funding, largely due to solid investment gains of 2.66% in aggregate. Estimated returns for these plans in Q2 ranged from a low of 1.33% to a high of 4.39%. When combined with the stellar gains made in Q1, PPFI plans have now mostly recovered the investment losses they suffered in the final quarter of 2018. The PPFI’s overall funded ratio increased over the last quarter, from 71.0% at the end of March to 72.2% as of June 30, 2019.
Public pension funded ratios are basically back where they were a year ago but over the past 12 months annualized returns, at 6.0%, fell short of long-term expectations. It’s good to remember that investment horizons for these plans are measured in decades, so short-term fluctuations are something plan sponsors have to live with to reap long-term rewards.
As of June 30, 2019, the PPFI deficit stands at $1.458 trillion compared to $1.508 trillion at the end of March. The total pension liability (TPL) continues to grow, and stood at an estimated $5.247 trillion at the end of Q2, up from $5.205 trillion at the end of Q1 2019. A deeper analysis around funding, investment assumptions, and discount rates will be available later this summer as part of Milliman’s annual Public Pension Funding Study.
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