The overall funding ratio of the 100 largest U.S. public pension plans rose to 74.9% as of Dec. 31 from 72.7% the quarter before, according to the Milliman 100 Public Pension Funding index.
The improvement of 2.2 percentage points was the highest seen since Milliman began utilizing the index. For the year, investment returns contributed mightily to a dramatic improvement in the overall funding ratio from 67.2% as of Dec. 31, 2018.
"The 15.9% annualized investment returns we saw for these plans far exceeded expected assumptions for 2019," said Becky Sielman, author of the Milliman 100 Public Pension Funding Index. "But given the recent stock market volatility, 2020 seems off to a tougher start. It remains to be seen whether the market reaction to the Coronavirus will be a repeat of 2018 (that is, a brief downturn and then robust recovery) or more of a prolonged recession such as we saw in 2009."
For the fourth quarter, the plans in the index had an aggregate return of 4.47%.
As of Dec. 31, the asset value of the Milliman 100 totaled $3.979 trillion, up 3.8% from three months earlier, and liabilities totaled $5.313 trillion, up 0.8% from the quarter before.
Among the 100 plans measured by Milliman, 20 plans had funding ratios above 90% as of Dec. 31, up from 17 as of Sept. 30, and 26 plans had funding ratios lower than 60%, down from 28 plans three months earlier.
Fourth-quarter index results are available on Milliman's website.