The funding ratio for the largest public pension plans in the U.S. rose to 71.2% from 66% over during the second quarter, according to Milliman. This represents the largest quarterly increase in the history of the Milliman 100 Public Pension Funding index.
Markets rallied in the second quarter, resulting in a $308 billion in the market value of assets and reversing first-quarter losses for these pension funds, which in aggregate had investment returns of 10.7% in the second quarter.
Twelve plans were at least 90% funded as of June 30, up from four as of March 31. Meanwhile, seven plans moved above 60% funded, bringing the total number of plans under this mark to 28, down from 35 at the first quarter.
The total pension liability rose to an estimated $5.398 trillion at the end of the second quarter, up from $5.355 trillion at the end of the previous quarter.
"While public pension funding status has improved dramatically over the past three months, the longer-term economic impact of COVID-19 on funding remains uncertain," said Rebecca A. Sielman, principal and consulting actuary at Milliman and author of the Milliman 100 Public Pension Funding index, in a news release announcing the results. "Returns for the past 12 months ending June 2020 averaged just 3.84%— markedly lower than plan sponsor reported funding interest rates — which means the 2019-2020 reporting year will likely go into the books as a year of modest investment losses, despite the Q2 rally."