The aggregate funded status of the 100 largest U.S. public pension plans rose to an estimated 73.1% as of Dec. 31, up from 71.6% at the end of September, said Milliman's most recent quarterly public pension funding study released Friday.
Asset values rose an estimated 2.8% during the quarter to $3.62 trillion as of Dec. 31, which outpaced an estimated 0.8% quarterly increase in liabilities to $4.95 trillion. In aggregate, these plans saw quarterly investment returns of 3.24%, up from 2.97% during the third quarter.
The fourth quarter's strong investment returns helped propel five more public pension funds across the 90% funded mark, bringing the total number of plans with funding ratios of more than 90% to 21. Of the remaining plans analyzed, 55 had funding ratios between 60% and 90%, and 24 were below 60%.
"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," said Rebecca A. Sielman, principal, consulting actuary and author of the study, in a news release about the results. "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."
The report also found that while investments brought in about $126 billion, the plans collectively paid out about $28 billion more in benefits than they took in from contributions.