A second consecutive month of overall positive market performance during March 2024 increased the estimated funded status of the 100 largest U.S. public pension plans from 78.6% as of February 29, 2024, to 79.7% as of March 31, 2024, as measured by the Milliman 100 Public Pension Funding Index (PPFI). This marks the highest level since March 31, 2022, when the funded status stood at 82.7%.
Figure 1: PPFI funded ratio
We have projected the aggregate funded status forward from March 31, 2024, to March 31, 2025, 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 March 2024, the deficit between the estimated plan assets and liabilities decreased from $1.333 trillion at the beginning of the month to $1.271 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of 1.7% in March, with individual plans’ estimated returns ranging from 0.9% to 2.6%. The Milliman 100 PPFI asset value increased from $4.907 trillion as of February 29, 2024, to $4.983 trillion as of March 31, 2024. During March, the plans gained market value of approximately $85 billion, which was offset by a net negative cash flow of approximately $9 billion.
From month to month during the 24-month period since the last funded status high-water mark, investment returns varied from -5.8% to +5.2%, with 10 months of negative returns more than balanced by 14 months of positive returns. The overall asset performance over the entire 24-month period was an average annualized return of 2.6%.
Figure 3: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.254 trillion as of March 31, 2024, up from $6.240 trillion as of February 29, 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
March’s market improvement pushed four plans above the 90% funded mark as of March 31, 2024; now 25 plans stand above this benchmark compared to 21 as of February 29, 2024. Meanwhile, at the lower end of the spectrum, 15 plans remain below 60% funded.
Figure 5: Funded ratios at March 31, 2024
About the Public Pension Funding Index
This update is an estimate based on Milliman’s 2023 Public Pension Funding Study and was updated for market returns from June 30, 2023, to March 31, 2024. The 2023 annual study encompasses adjustments made as of June 30, 2023, and reflects updated publicly available asset and liability information gathered for the annual study.