Public pension plan assets continued their slide downward during June 2022, with the estimated funded ratio of the 100 largest U.S. public pension plans falling from 78.4% on May 31, 2022, to 74.0% as of June 30, 2022, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The deficit between the estimated assets and liabilities widened significantly during June, from $1.259 trillion at the beginning of the month to $1.521 trillion at the end of the month.
Figure 1: PPFI funded ratio
In aggregate, we estimate the PPFI plans experienced investment returns of -5.13% in June, with individual plans’ estimated returns ranging from -7.49% to -2.27%. The Milliman 100 PPFI asset value decreased from $4.566 to $4.318 trillion during June. The plans shed market value of approximately $240 billion, on top of approximately 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 $5.839 trillion on June 30, 2022, up from $5.825 trillion at May 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
The market decline pushed eight plans below the 90% funded mark as of June 30, 2022; now just 19 plans still stand above this benchmark, compared to 27 on May 31, 2022, and 46 at the close of 2021. Meanwhile, at the lower end of the spectrum, five more plans fell below 60% funded as of June 30, 2022, bringing the total number of plans under this mark to 26, up from 21 on May 31, 2022, and 18 at the close of 2021.
Figure 4: Funded ratios at June 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 June 30, 2022. The 2021 annual study reflects adjustments made as of the end of June 2021 to reflect updated publicly available asset and liability information gathered for the annual study.