Very poor market performance during September 2022 lowered the estimated funded status of the 100 largest U.S. public pension plans from 75.0% as of August 31, 2022, to 69.3% as of September 30, 2022, as measured by the Milliman 100 Public Pension Funding Index (PPFI). The deficit between the estimated assets and liabilities rose during September, from $1.467 trillion at the beginning of the month to $1.808 trillion at the end of the month.
Figure 1: PPFI funded ratio
In aggregate, we estimate the PPFI plans experienced investment returns of -6.6% in September, with individual plans’ estimated returns ranging from -9.6% to -3.3%. The Milliman 100 PPFI asset value decreased from $4.401 trillion as of August 31, 2022, to $4.075 trillion as of September 30, 2022. During September, the plans lost market value of approximately $318 billion, on top of an 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 $5.883 trillion as of September 30, 2022, up from $5.868 trillion as of August 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
September’s market decline pushed seven plans below the 90% funded mark at September 30, 2022; now 12 plans still stand above this benchmark compared to 19 at the end of August 31, 2022, and 46 at the close of 2021. Meanwhile, at the lower end of the spectrum, seven plans fell below 60% funded, bringing the total number of plans under this mark to 31, up from 24 at August 31, 2022, and 18 at the close of 2021.
Figure 4: Funded ratios at September 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 September 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.