A second consecutive month of declines in financial markets during September 2023 lowered the estimated funded status of the 100 largest U.S. public pension plans from 75.3% as of August 31, 2023, to 73.2% as of September 30, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI).
Figure 1: PPFI funded ratio
During September 2023, the deficit between the estimated assets and liabilities increased from $1.508 trillion at the beginning of the month to $1.636 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of -2.6% in September, with individual plans’ estimated returns ranging from -4.2% to -1.6%. The Milliman 100 PPFI asset value decreased from $4.591 trillion as of August 31, 2023, to $4.477 trillion as of September 30, 2023. During September, the plans lost market value of approximately $104 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 $6.113 trillion as of September 30, 2023, up from $6.099 trillion as of August 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
September’s market decline pushed one plan below the 90% funded mark as of September 30, 2023; 16 plans now stand above this benchmark compared to 17 at the end of August 31, 2023. Meanwhile, at the lower end of the spectrum, two plans fell below 60% funded, bringing the total number of plans under this mark to 25, up from 23 as of August 31, 2023.
Figure 4: Funded ratios at September 30, 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 September 30, 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.