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Milliman: Top 100 Public Pension Plans Funded Status Improves by $36 Billion in Q3

Interest, new benefit accrual boosts total pension liability to almost $5 trillion.

By Chris Butera

Funded status for the top 100 US public pension plans improved by $36 billion in Q3 2017, according to Public Pension Plan Funding Index (PPFI) data released Monday by global consulting and actuarial firm Milliman, Inc.

Milliman’s data revealed the aggregate investment returns for these plans reached 2.97%, with a spread ranging from a 1.63% low to a 3.83% high. At the end of Q3, the funded status of the Milliman 100 PPFI grew nearly 1% from 70.7% at the end of June to 71.6% on September 30.

However, the Milliman 100 PPFI’s total pension liability (TPL) also increased, growing from $4.871 trillion at the end of Q2 to an estimated $4.98 trillion at the end of Q3. According to Milliman, the TPL will “grow modestly over time” as interest on the TPL and the accrual of new benefits exceeds the benefits paid to retirees.In addition, asset values for the top 100 plans have also increased in the same timeframe from $3.443 trillion to $3.517 trillion.

Although investments raked in roughly $102 billion, $28 billion more in benefits were collectively paid out by the plans than acquired from contributions.

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“These plans are moving in the right direction, with two more crossing the 90% funded mark in Q3, bringing the total to 16 plans with 90% funding or above,” Becky Sielman, author of the Milliman 100 Public Pension Funding Index, said in a statement. “But that progress is hampered as plan sponsors reduce their interest rate assumptions to reflect current market expectations—something one-third of the plans in this study have done in their latest reported fiscal year.”

Public Pension Funding Index. Source: Milliman, Inc. 

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Home > News > Newsmakers > Pennsylvania Pension Returns 3.7% in Q3
Newsmakers

Pennsylvania Pension Returns 3.7% in Q3

Board also approves $175 million in new commitments. 

By Michael Katz

The Pennsylvania State Employees’ Retirement System (PSERS) reported a 3.7% return for the third quarter of 2017, and an 11.2% net-of-fees return on investments during the first nine months that added nearly $2.9 billion in earnings to the fund.

“Strong performance from the global public equity, private equity, and fixed income portfolios have driven strong calendar-year returns,” said PSERS CIO Bryan Lewis in a statement.

The returns kept pace with the system’s first-half returns of 7.1% that generated nearly $1.9 billion in net-of-fees earnings.

The PSERS board also approved up to $175 million in new commitments that will be funded from cash subject to successful completion of contract negotiations. The board approved a commitment of up to $100 million to Brightwood Capital Fund IV, L.P., to focus on private debt investments in US middle-market companies. The remaining $75 million was approved to Providence Strategic Growth III, L.P. as a follow-on investment to focus on growth equity investments in lower middle-market technology-enabled companies in North America.

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The commitments come on the heels of $225 million in new commitments announced in November. Of this amount, $150 million was earmarked for its multi-strategy asset class to TSSP Adjacent Opportunities Partners, L.P., as a follow-on investment to the strategy the board approved in September. The fund will focus on the purchase or origination of opportunistic credit, special situations, and distressed investments. The other $75 million was committed to Clearlake Capital Partners V, L.P., as a follow-on investment to focus on value-oriented buyouts, credit/structured equity, and distressed/turnaround transactions involving North American middle-market companies.

The board also said it received a study, requested during its September meeting, in partnership with the administrator of the commonwealth’s voluntary 457 deferred compensation plan for state employees. The study investigated developing a plan to increase participation in the program among currently eligible employees and to identify the steps necessary to expand eligibility to municipal employees across the state. The board also directed the personnel committee to advertise for executive director candidates to fill the vacancy that will be left after the Jan. 5, 2018, retirement of David Durbin, which was announced in November.

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