Milliman* reported that the funded status of the 100 largest public pension plans rose to 78.6% at the end of 2020 from 72.6% at the end of 2019. These plans are at their highest level of funding since 2016, according to the data. At the end of the first quarter of 2020, the funded status was 66%.
Plan assets appreciated 11.4% during the year. This gain was partially offset by net pension outflows as benefits paid out exceeded employer and employee contributions.
Compared to private pension plans, public plans saw a larger relative improvement in funded status over the year. This is because hedge ratios for public plans tend to be lower than for private pension plans. Unhedged plan assets retain more upside when return generating assets appreciate, as they did the in latter part of 2020.
*Source: Milliman 100 Public Pension Funding Index, January 2021.