Funded ratios of the 100 largest U.S. public pension plans tumbled from 78.4% as of May 31, 2022, to 74.0% as of June 30, 2022, but favorable winds during July brought funded ratios back up to 77.3% as of July 31, 2022, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The deficit between the estimated assets and liabilities narrowed during July, from $1.521 trillion at the beginning of the month to $1.327 trillion at the end of the month.
Figure 1: PPFI funded ratio
In aggregate, we estimate the PPFI plans experienced investment returns of 4.7% in July, with individual plans’ estimated returns ranging from 2.1% to 8.2%. The Milliman 100 PPFI asset value increased from $4.318 trillion as of June 30, 2022, to $4.527 trillion as of July 31, 2022. During July the plans gained market value of approximately $217 billion, which was offset by 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 $5.854 trillion as of July 31, 2022, up from $5.839 trillion as of June 30, 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 modest July recovery propelled seven plans back above the 90% funded mark as of July 31, 2022; now 26 plans stand above this benchmark, an improvement compared to 19 at the end of June 30, 2022, but still far below the 46 plans that were over 90% funded at the close of 2021. Meanwhile, at the lower end of the spectrum, four plans climbed above 60% funded, leaving the total number of plans below this mark at 22, down from 26 as of June 30, 2022, but still higher than 18 at the close of 2021.
Figure 4: Funded ratios at July 31, 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 July 31, 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.