Public pensions rebound in Q2 with $308 billion asset gain

Milliman today released the second quarter 2020 results of its Public Pension Funding Index (PPFI), which consists of the nation’s 100 largest public defined benefit pension plans.

During Q2 2020, public pension funding rebounded gaining $308 billion in the market value of assets and reversing Q1 losses. The PPFI plans saw investment returns of approximately 10.72% for the quarter, nearly completing the recovery from the -10.81% returns suffered in Q1. The estimated funded ratio for these pensions rebounded from 66.0% at the end of March 2020 to 71.2% at the end of June 2020.

While public pension funding status has improved dramatically over the past three months, the longer-term economic impact of COVID-19 on funding remains uncertain. Returns for the past twelve months ending June 2020 averaged just 3.84% – markedly lower than plan sponsor reported funding interest rates – which means the 2019-2020 reporting year will likely go into the books as a year of modest investment losses, despite the Q2 rally.

As of Q2 2020, there are 12 PPFI plans above the 90% funded mark; just four plans stood above this benchmark at the end of Q1 2020. Meanwhile, at the lower end of the spectrum seven plans moved above 60% funded, bringing the total number of plans under this mark to 28, down from 35 at Q1 2020.

To view the Milliman 100 Public Pension Funding Index, click here.

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

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