Positive overall asset performance during February 2024 increased the estimated funded status of the 100 largest U.S. public pension plans from 77.7% as of January 31, 2024, to 78.6% as of February 29, 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 February 29, 2024, to February 28, 2025, under three scenarios. The baseline scenario assumes each plan’s future investment returns equals 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 February 2024, the deficit between the estimated plan assets and liabilities decreased from $1.389 trillion at the beginning of the month to $1.333 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of 1.7% in February, with individual plans’ estimated returns ranging from 0.0% to 3.2%. The Milliman 100 PPFI asset value increased from $4.837 trillion as of January 31, 2024, to $4.907 trillion as of February 29, 2024. During February, the plans gained market value of approximately $79 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 $6.240 trillion as of February 29, 2024, up from $6.226 trillion as of January 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
Although most plans saw an improvement in their funded status, the above-average market performance did not move any plans across either the 60% or 90% funded ratio mark. As of February 29, 2024, there were still 21 plans above 90% funded, and still 15 plans below 60% funded.
Figure 5: Funded ratios at February 29, 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 February 29, 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.