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February 23, 2018 at 09:33 AM
The funded status of the 100 biggest public defined benefit pension plans in the U.S. grew by $60 billion in the fourth quarter, the result of robust equity returns in 2017, Milliman Inc., a consulting and actuarial firm, reported Friday.
These plans, which comprise Milliman’s Public Pension Funding Index, had investment returns of 3.2%, with a spread ranging from 1.6% to 4.3%.
The plans’ funded ratio rose to 73.1% from 71.6% in the third quarter.
Milliman noted that strong investment returns during the fourth quarter helped five public pensions cross the 90% funded threshold, bringing the total to 21 that have done so.
“While a lot of media attention has been paid to the recent market volatility in early February, it’s not a reason to panic when it comes to public pensions,” Becky Sielman, author of the Milliman index, said in a statement.
“Equity gains and losses are typically smoothed out over a number of years when calculating pension funding, making short-term market volatility less of a concern on funding than, say, interest rate assumptions, which carry greater long-term implications for these pensions.”
