A decline in market performance during December 2022 lowered the estimated funded status of the 100 largest U.S. public pension plans from 74.7% as of November 30, 2022, to 72.8% as of December 31, 2022, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The deficit between the estimated assets and liabilities rose during December, from $1.496 trillion at the beginning of the month to $1.613 trillion at the end of the month.
Figure 1: PPFI funded ratio
In aggregate, we estimate the PPFI plans experienced investment returns of -1.8% in December, with individual plans’ estimated returns ranging from -3.7% to -0.7%. The Milliman 100 PPFI asset value decreased from $4.417 trillion as of November 30, 2022, to $4.315 trillion as of December 31, 2022. During December, the plans lost market value of approximately $94 billion, on top of a net negative cash flow of approximately $8 billion. For the 2022 calendar year, we estimate that the PPFI plans experienced an investment return of -12.0%.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $5.928 trillion as of December 31, 2022, up from $5.913 trillion as of November 30, 2022. 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 3: PPFI funded status
December’s market decline pushed two plans below the 90% funded mark as of December 31, 2022; 17 plans now stand above this benchmark compared to 19 as of November 30, 2022, which is well below the 46 plans that were above 90% funded at the close of 2021. Meanwhile, at the lower end of the spectrum, two plans fell below 60% funded, bringing the total number of plans under this mark to 26. This is up from 24 as of November 30, 2022, and higher than the 18 plans that stood below 60% funded at the close of 2021.
Figure 4: Funded ratios at December 31, 2022
About the Public Pension Funding Index
This update is an estimate based on Milliman’s annual Public Pension Funding Study and updated for market returns from June 30, 2021, to December 31, 2022. The 2021 annual study reflects adjustments made as of the end of June 30, 2021, to reflect updated publicly available asset and liability information gathered for the annual study.