Milliman: Largest public plans see record drop in funding ratio for Q1

The funding ratio for the largest public pension plans in the U.S. dropped to 66% from 74.9% over the course of the first quarter, according to Milliman. This represents the largest quarterly drop in the history of the firm's Public Pension Funding index.

Market volatility from the coronavirus pandemic resulted in a $419 billion loss in the market value of assets for these pension funds, which in aggregate had investment returns of -10.8% in the first quarter.

Only four plans were at least 90% funded as of March 31, down from 20 as of Dec. 31. Meanwhile, nine plans fell below the 60% funded mark, bringing the total number of plans with a funding ratio below 60% to 35, up from 26 as of Dec. 31.

The total pension liability rose to an estimated $5.355 trillion at the end of the first quarter, up from $5.313 trillion at the end of the previous quarter.

"Coming off the heels of what was a stellar fourth quarter in 2019, the economic fallout from the COVID-19 pandemic has completely wiped out any public pension funding gains we saw last year," said Rebecca A. Sielman, author of the Milliman 100 Public Pension Funding index, in a news release announcing the results. "While these pensions now have a long way to go to return to pre-pandemic funding levels, it's important to remember that most public pension plans use some sort of asset smoothing mechanism to dampen the impact of market gyrations. This gives plan sponsors some breathing space to explore and plan for how this market downturn will impact contributions."