Coming on the heels of the significant market declines in the February to April timeframe, May’s flat market performance resulted in very little movement in the key financial metrics impacting public pension plans. The estimated funded ratio of the 100 largest U.S. public pension plans moved very slightly lower, from 78.6% at the end of April 2022 to 78.4% at the end of May 2022, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The deficit between the estimated assets and liabilities widened by a correspondingly modest amount, from $1.243 trillion to $1.259 trillion during May.
Figure 1: PPFI funded ratio
In aggregate, we estimate the PPFI plans experienced investment returns of 0.16% in May, with individual plans’ estimated returns ranging from -0.72% to 1.80%. The Milliman 100 PPFI asset value remained essentially unchanged, nudging slightly from $4.567 trillion to $4.566 trillion in May. The plans actually gained a small amount of market value (approximately $7 billion), but had very slightly higher net negative cash flow (approximately $8 billion).
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $5.825 trillion at the end of May 2022, up from $5.810 trillion at the end of April 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
Figure 4: Funded ratios at May 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 May 31, 2022. The 2021 annual study reflects adjustments made as of the end of June 2021 to reflect updated publicly available asset and liability information gathered for the annual study.