Public pension funded ratio improves to
72.2% in Q2 2019, up from 71.0%
PPFI’s $50 billion funded status improvement paced by
investment performance of 2.66%
The second quarter of 2019 continued the upward trend in asset returns for public
pensions, with the estimated funded ratio of the 100 largest U.S. public pension plans
as measured by the Milliman 100 Public Pension Funding Index (PPFI), growing from
71.0% at the end of March 2019 to 72.2% at the end of June 2019.
The deficit dropped to $1.458 trillion at the end of June 2019, down
from $1.508 trillion at the end of March 2019. Plans have now
recovered much of the investment losses they suffered in Q4 2018.
In aggregate, the PPFI plans experienced an investment gain of
2.66% in Q2, with estimated returns ranging from 1.33% to 4.39%.
The overall annualized return for the 12 months ending June 30,
2019, is slightly under 6.0%, falling short of the expected longterm
earnings assumptions for the majority of the PPFI plans.
The Milliman 100 PPFI asset value rose modestly from
$3.697 trillion at the end of Q1 2019 to $3.789 trillion at the
end of Q2 2019. The plans gained investment market value of
approximately $119 billion, which was offset by approximately
$27 billion flowing out, as benefits paid out exceeded
contributions coming in from employers and plan members.
Quarterly investment returns
The total pension liability (TPL) continues to grow and stood
at an estimated $5.247 trillion at the end of Q2 2019, up from
$5.205 trillion at the end of Q1 2019. Just as pension assets grow
over time with investment income and shrink over time as
benefits are paid, so too does the TPL grow over time with
interest and shrink as benefits are paid. The TPL also grows as
active members accrue pension benefits.
Quarterly funded status
Funded ratios moved higher this quarter, with three plans moving back above the 90% funded mark; 17 plans currently stand above this benchmark, compared to 14 at the end of Q1 2019. At the lower end, the number of more poorly funded pension plans remained the same. There are 28 plans that have funded ratios below 60%, and nine plans remain below 40% funded.
Funded ratio at June 30, 2019
About the Milliman 100 Public Pension Funding Index
Since 2012, Milliman has conducted an annual study of
the 100 largest defined benefit plans sponsored by U.S.
governments. The Milliman 100 Public Pension Funding
Index projects the funded status for pension plans
included in our study, reflecting the impact of actual
market returns, utilizing the actual reported asset values,
liabilities, and asset allocations of the pension plans.
The results of the Milliman 100 Public Pension
Funding Index are based on the pension plan financial
reporting information disclosed in the plan sponsors’
Comprehensive Annual Financial Reports, which
reflect measurement dates ranging from June 30, 2016 to
December 31, 2017. This information was summarized as
part of the Milliman 2018 Public Pension Funding Study,
which was published on January 15, 2019.
This quarterly update reflects
adjustments made as of the
end of June 2018 as part
of Milliman’s annual Public
Pension Funding Study, just
recently published, found
here milliman.com/ppfs. The
adjustments reflect updated
publicly available asset and
liability information gathered
for the annual study.