Static market performance in January 2024 lowered the estimated funded status of the 100 largest U.S. public pension plans slightly, from 78.2% as of December 31, 2023, to 77.7% as of January 31, 2024, as measured by the Milliman 100 Public Pension Funding Index (PPFI).
Figure 1A: PPFI funded ratio
We have projected the aggregate funded status forward from January 31, 2024, to January 31, 2025, under three scenarios. The baseline scenario assumes each plan’s future investment returns will equal that plan’s current reported interest rate assumption (median rate of 7.0% in this study). The “optimistic” and “pessimistic” scenarios assume each plan’s investment returns will be 7% higher or lower, respectively, than that plan’s current reported interest rate assumption.
Figure 1B: PPFI funded ratio with projections
During January 2024, the deficit between the estimated plan assets and liabilities increased from $1.356 trillion at the beginning of the month to $1.389 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of 0.0% in January, with individual plans’ estimated returns ranging from -1.0% to 1.1%. The Milliman 100 PPFI asset value decreased from $4.857 trillion as of December 31, 2023, to $4.837 trillion as of January 31, 2024. During January, the plans lost market value of approximately $11 billion, on top of net negative cash flow of approximately $9 billion.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.226 trillion as of January 31, 2024, up from $6.213 trillion as of December 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 lackluster market performance led to no change in the number of plans above the 90% funded mark as of January 31, 2024; 21 plans still stand above this benchmark. Similarly, at the lower end of the spectrum, there was no change in the number of plans below 60% funded, which remained at 15.
Figure 4: Funded ratios at January 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 January 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.