October and November 2022 brought consecutive months of positive market gains, which improved the estimated funded status of the 100 largest U.S. public pension plans from 69.3% as of September 30 , 2022, to 71.6% as of October 31, 2022, and 74.7% as of November 30, 2022, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The difference between the estimated assets and liabilities narrowed during October and November, from $1.808 trillion at the beginning of October to $1.496 trillion at the end of November.
Figure 1: PPFI funded ratio
In aggregate, we estimate the PPFI plans experienced investment returns of 2.8% in October and 4.7% in November, with individual plans’ estimated returns ranging from -1.3% to 5.3% in October and 2.5% to 7.2% in November. The Milliman 100 PPFI asset value increased from $4.075 trillion as of September 30, 2022, to $4.225 trillion as of October 31, 2022, and to $4.417 trillion as of November 30, 2022. During October, the plans gained market value of approximately $158 billion, which was offset by a net negative cash flow of $8 billion. During November, the plans gained market value of approximately $200 billion, which was offset by a net negative cash flow of $8 billion.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $5.913 trillion as of November 30, 2022, up from $5.883 trillion as of September 30, 2022, and $5.898 trillion as of October 31, 2022. 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
October and November’s market improvement pushed seven plans above the 90% funded mark as of November 30, 2022; now 19 plans stand above this benchmark compared to 12 as of September 30, 2022, which is still well below the 46 plans that were above 90% funded at the close of 2021. Meanwhile, at the lower end of the spectrum, seven plans moved above the 60% funded mark, lowering the total number of plans under this mark to 24, down from 31 as of September 30, 2022, but still higher than the 18 plans that stood below 60% funded at the close of 2021.
Figure 4: Funded ratios at November 30, 2022
About the Public Pension Funding Index
This update is an estimate based on Milliman’s annual Public Pension Funding Study and updated for market returns from June 30, 2021, to November 30, 2022. The 2021 annual study reflects adjustments made as of the end of June 30, 2021, to reflect updated publicly available asset and liability information gathered for the annual study.