The summer months have fueled positive funded status growth for public pensions, with a fourth consecutive month of robust investment returns pushing the estimated funded status of the 100 largest U.S. public pension plans from 80.8% as of July 31, 2024, to 82.0% as of August 31, 2024, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The funded status is approaching the previous PPFI high-water mark of 85.5% reached at the close of 2021.
Figure 1: PPFI funded ratio
We have projected the aggregate funded status forward from August 31, 2024, to August 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 August 2024, the deficit between the estimated plan assets and liabilities decreased from $1.210 trillion at the beginning of the month to $1.138 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of 1.5% in August, with individual plans’ estimated returns ranging from 0.8% to 2.5%. The Milliman 100 PPFI asset value increased from $5.099 trillion as of July 31, 2024, to $5.184 trillion as of August 31, 2024. During August, the plans gained market value of approximately $95 billion, which was offset by a net negative cash flow of approximately $10 billion.
Figure 3: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.322 trillion as of August 31, 2024, up from $6.309 trillion as of July 31, 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
August’s positive asset performance pushed two more plans above the 90% funded mark as of August 31, 2024; now 29 plans stand above this benchmark compared to 27 as of July 31, 2024. Meanwhile, at the lower end of the spectrum, 15 plans remain less than 60% funded.
Figure 5: Funded ratios at August 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 August 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.