January and February 2023 brought first a rise and then a fall in funded status, with the overall estimated funded status of the 100 largest U.S. public pension plans climbing from 72.6% as of December 31, 2022, to 75.4% as of January 31, 2023, and then declining to 73.6% as of February 28, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The difference between the estimated assets and liabilities narrowed over the two-month span of January and February, from $1.641 trillion at the end of December 2022 to $1.588 trillion at the end of February 2023.
Figure 1: PPFI funded ratio
In aggregate, we estimate the PPFI plans experienced investment returns of 4.4% in January and -2.0% in February, with individual plans’ estimated returns ranging from 2.7% to 6.5% in January and -2.9% to -1.0% in February. The Milliman 100 PPFI asset value increased from $4.341 trillion as of December 31, 2022, to $4.521 trillion as of January 31, 2023, before decreasing to $4.423 trillion as of February 28, 2023. During January, the plans gained market value of approximately $189 billion, which was offset by net negative cash flow of $9 billion. During February, the plans lost market value of approximately $89 billion, on top of a net negative cash flow of $9 billion.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.011 trillion as of February 28, 2023, up from $5.982 trillion as of December 31, 2022 and $5.997 trillion as of January 31, 2023. 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
The seesaw market performance during January and February resulted in no change in the number of plans above the 90% funded mark as of February 28, 2023, as compared to December 31, 2022; 17 plans continue to stand above this benchmark. Meanwhile, at the lower end of the spectrum, two plans moved above the 60% funded mark, bringing the total number of plans under this mark to 24, down from 26 as of December 31, 2022.
Figure 4: Funded ratios at February 28, 2023
About the Public Pension Funding Index
This update is an estimate based on Milliman’s 2022 Public Pension Funding Study and updated for market returns from June 30, 2022, to February 28, 2023. The 2022 annual study reflects adjustments made as of the end of June 30, 2022, to reflect updated publicly available asset and liability information gathered for the annual study.