Milliman today released the third quarter results of its Public Pension Funding Index (PPFI), which consists of the nation’s 100 largest public defined benefit pension plans. In Q3 2017, these plans experienced a $36 billion improvement as a result of strong investment performance. In aggregate, these plans saw investment returns of 2.97%, with a spread ranging from a low of 1.63% to a high of 3.83%. The funded status of the Milliman 100 PPFI climbed from 70.7% at the end of June to 71.6% as of September 30.
These plans are moving in the right direction, with two more crossing the 90% funded mark in Q3, bringing the total to 16 plans with 90% funding or above. But that progress is hampered as plan sponsors reduce their interest rate assumptions to reflect current market expectations—something one-third of the plans in this study have done in their latest reported fiscal years.
The Milliman 100 PPFI total pension liability (TPL) increased from $4.871 trillion at the end of Q2 to an estimated $4.908 trillion at the end of Q3. The TPL is expected to grow modestly over time as interest on the TPL and the accrual of new benefits outpaces the benefits paid to retirees. Asset values for these plans have increased from $3.443 trillion to $3.517 trillion during the same time period; and while investments brought in approximately $102 billion, the plans collectively paid out $28 billion more in benefits than they took in from contributions.
To view the Milliman 100 Public Pension Funding Index, click here.
To receive regular updates of Milliman’s pension funding analysis, contact us here.