Public pension assets plummet in 2018 Q4, experiencing largest quarterly losses in two years

Milliman today released the 2018 fourth quarter results of its Public Pension Funding Index (PPFI), which consists of the nation’s 100 largest public defined benefit pension plans. In 2018 Q4, these plans experienced a $306 billion loss in funding, largely due to a disappointing quarterly investment return of -6.39% in aggregate. This marks the largest quarterly funding decrease since the PPFI began in September 2016. Estimated investment returns for plans in Q4 ranged from a low of -10.27% to a high of -2.18%. As a result, the funding ratio of the Milliman PPFI dropped from 72.9% at the end of September to 67.2% as of December 31.

Public pensions took a huge hit in the fourth quarter of 2018. And for those plans in which benefits paid out exceed contributions coming in, this is especially difficult news, as investment returns are critical to slow the outflow of funding.

As of December 31, 2018, the PPFI deficit stands at $1.693 trillion, compared to $1.387 trillion at the end of September 2018. The total pension liability (TPL) continues to grow, and stood at an estimated $5.164 trillion at the end of Q4, up from $5.123 trillion at the end of Q3. Funded ratios overall moved lower this quarter, with nine plans dropping below the 90% funded mark; there are now just eight plans above this mark, compared to 17 at the end of Q3.

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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