The aggregate funded status of the 100 largest U.S. public pension plans fell to an estimated 67.2% as of Dec. 31, from 72.9% as of Sept. 30, said Milliman's most recent quarterly public pension funding study, released Friday.
Asset values dropped an estimated 7.1% during the quarter to $3.47 trillion, while liabilities increased 0.8% to $5.16 trillion. In aggregate, these plans saw quarterly investment returns of -6.39% in the fourth quarter, vs. 2.68% during the third quarter.
The fourth quarter's investment returns caused nine public pension funds to drop below the 90% funded mark, bringing the total number of plans with funding ratios higher than 90% to eight, down from 17 during the third quarter. Of the remaining plans analyzed, 59 had funding ratios between 60% and 90%, and 33 were below 60%. Eleven plans are below 40% funded.
"Public pensions took a huge hit in the fourth quarter of 2018," said Rebecca A. Sielman, principal, consulting actuary and author of the study, in a news release about the results. "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."
The report also found that the plans lost investment market value of about $239 billion, on top of about $26 billion flowing out, as benefits paid out exceeded contributions coming in from employers and plan participants.