December markets ended 2024 on a negative note, causing the 100 largest U.S. public pension plans to experience a monthly investment return of -1.7%, while January 2025 generated a postive investment return of 1.9%, as measured by the Milliman 100 Public Pension Funding Index (PPFI). In aggregate, we estimate the plans earned 8.7% over the last calendar year, with their estimated funded status decreasing from 81.7% as of November 30, 2024, to 80.0% as of December 31, 2024, before rising back up to 81.1% as of January 31, 2025.
Figure 1: PPFI funded ratio
We have projected the aggregate funded status forward from January 31, 2025, to January 31, 2026, under three scenarios. The baseline scenario assumes each plan’s future investment returns equal that plan’s current reported interest rate assumption (median rate = 7.0% in this study). The “optimistic” and “pessimistic” scenarios assume each plan’s investment returns are 7% higher and lower, respectively, than that plan’s current reported interest rate assumption.
Figure 2: PPFI funded ratio with projections
During December 2024 and January 2025, the deficit between the estimated plan assets and liabilities increased from $1.184 trillion at the beginning of December 2024 to $1.227 trillion at the end of January 2025. In aggregate, we estimate the PPFI plans experienced investment returns of -1.7% in December 2024 and 1.9% in January 2025, with individual plans’ estimated returns ranging from -3.4% to -0.6% in December 2024 and from 1.0% to 3.7% in January 2025. The Milliman 100 PPFI asset value decreased from $5.294 trillion as of November 30, 2024, to $5.194 trillion as of December 31, 2024, and rebounded to $5.281 trillion as of January 31, 2025. During December, the plans lost market value of approximately $91 billion on top of a net negative cash flow of $9 billion. During January, the plans gained market value of approximately $96 billion, again offset by a net negative cash flow of approximately $9 billion.
Figure 3: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.508 trillion as of January 31, 2025, up from $6.478 trillion as of November 30, 2024, and $6.493 trillion as of December 31, 2024. Just as pension assets grow over time with investment income and shrink over time as benefits are paid, so too does the TPL grow over time with interest and shrink as benefits are paid. The TPL also grows as active members accrue pension benefits.
Figure 4: PPFI funded status
The combined market changes in December 2024 and January 2025 saw two plans drop below the 90% funded mark as of January 31, 2025; now 31 plans stand above this benchmark compared to 33 as of November 30, 2024. Meanwhile, at the lower end of the spectrum, 11 plans remain less than 60% funded.
Figure 5: Funded ratios at January 31, 2025
About the Public Pension Funding Index
This update is an estimate based on Milliman’s 2024 Public Pension Funding Study and was updated for market returns from June 30, 2024, to January 31, 2025. The 2024 annual study encompasses adjustments made as of June 30, 2024, and reflects updated publicly available asset and liability information gathered for the annual study.