Public Pension Funding Is in Trouble

Public pension funding funding took a hit in the last three months of 2016, as asset returns fall short of benchmark, according to a report from consulting and actuarial firm Milliman, Inc.

These pensions cover public sector retirees. Their funding level is critical because taxpayers are ultimately responsible to making good on promises made to public sector employees.

Milliman tracks these developments through its Public Pension Funding Index, which consists of the nation’s 100 largest public defined benefit pension plans.

By December 31st 2016, the funded ratio of these plans had fallen to 70.1%, down from 71.0% at the end of September.

The funded status declined by $54 billion, the result of modest investment returns for the fourth quarter that fell short of their quarterly benchmark, Milliman said.

“The robust market performance seen post-election helped moderate the losses suffered in October, with Q4 investment returns of about 0.45% in aggregate for the quarter,” said Becky Sielman, author of Milliman’s Public Pension Funding Index.

“If the recent surge in the equity market holds up and interest rates remain stable, the returns in 2017 Q1 should be much more promising,” Sielman said.

Of course, if the stock market doesn’t keep rising, we might be in trouble.

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