While there was a significant amount of market activity during March, including another interest rate hike by the U.S. Federal Reserve and troubles in the banking sector, the overall impact was muted for the 100 largest U.S. public pension plans. Their estimated funded status increased modestly, from 73.6% as of February 28, 2023, to 74.5% as of March 31, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The deficit between the estimated assets and liabilities shrank slightly during March, from $1.588 trillion at the beginning of the month to $1.534 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 March, with individual plans’ estimated returns ranging from 0.7% to 2.8%. The Milliman 100 PPFI asset value increased from $4.423 trillion as of February 28, 2023, to $4.492 trillion as of March 31, 2023. During March, the plans gained market value of approximately $78 billion, which was offset by 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 $6.026 trillion as of March 31, 2023, up from $6.011 trillion as of February 28, 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
Although market performance for March was modestly positive, there were no changes in the number of plans below 60% funded or above the 90% funded mark; 24 plans continue to be below 60% and 17 plans continue to stand above 90%.
Figure 4: Funded ratios at March 31, 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 March 31, 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.