Robust growth in public pension assets during May 2024 largely erased April’s losses and increased the estimated funded status of the 100 largest U.S. public pension plans from 77.6% as of April 30, 2024, to 79.4% as of May 31, 2024, as measured by the Milliman 100 Public Pension Funding Index (PPFI).
Figure 1: PPFI funded ratio
We have projected the aggregate funded status forward from May 31, 2024, to May 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 May 2024, the deficit between the estimated plan assets and liabilities decreased from $1.404 trillion at the beginning of the month to $1.293 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of 2.3% in May, with individual plans’ estimated returns ranging from 1.3% to 3.5%. The Milliman 100 PPFI asset value increased from $4.864 trillion as of April 30, 2024, to $4.989 trillion as of May 31, 2024. During May, the plans gained market value of approximately $134 billion, which was offset by a net negative cash flow of approximately $9 billion.
Figure 3: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.282 trillion as of May 31, 2024, up from $6.268 trillion as of April 30, 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
Given May’s strong market performance, two plans climbed back above the 90% funded mark as of May 31, 2024; now 23 plans stand above this benchmark compared to 21 as of April 30, 2024. Meanwhile, at the lower end of the spectrum, 15 plans remain less than 60% funded.
Figure 5: Funded ratios at May 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 May 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.