A third straight month of declines in financial markets during October 2023 lowered the estimated funded status of the 100 largest U.S. public pension plans from 73.2% as of September 30, 2023, to 71.4% as of October 31, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI). An up-and-down 12 months, with six negative monthly returns mixed with six positive monthly returns, saw the growth in plan assets just keeping pace with the growth in plan liabilities, but no overall improvement in the aggregate funded ratio.
Figure 1: PPFI funded ratio
During October 2023, the deficit between the estimated plan assets and liabilities increased from $1.636 trillion at the beginning of the month to $1.750 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of -1.9% in October, with individual plans’ estimated returns ranging from -2.8% to -1.1%. The Milliman 100 PPFI asset value decreased from $4.477 trillion as of September 30, 2023, to $4.378 trillion as of October 31, 2023. During October, the plans lost market value of approximately $89 billion, on top of a net negative cash flow of approximately $10 billion.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.128 trillion as of October 31, 2023, up from $6.113 trillion as of September 30, 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
October’s market decline pushed four plans below the 90% funded mark as of October 31, 2023; 12 plans now stand above this benchmark compared to 16 as of September 30, 2023. Meanwhile, at the lower end of the spectrum, one plan fell below 60% funded, bringing the total number of plans under this mark to 26, up from 25 as of September 30, 2023.
Figure 4: Funded ratios at October 31, 2023
About the Public Pension Funding Index
This update is an estimate based on Milliman’s 2022 Public Pension Funding Study and was updated for market returns from June 30, 2022, to October 31, 2023. The 2022 annual study encompasses adjustments made as of June 30, 2022, and reflects updated publicly available asset and liability information gathered for the annual study.