A decline in overall market performance as of August 2023 lowered the estimated funded status of the 100 largest U.S. public pension plans from 76.8% as of July 31, 2023 to 75.3% as of August 31, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI).
Figure 1: PPFI funded ratio
During August 2023, the deficit between the estimated assets and liabilities increased from $1.410 trillion at the beginning of the month to $1.508 trillion at the end of the month. In aggregate, we estimate the PPFI plans experienced investment returns of -1.6% in August, with individual plans’ estimated returns ranging from -2.4% to -0.8%. The Milliman 100 PPFI asset value decreased from $4.675 trillion as of July 31, 2023, to $4.591 trillion as of August 31, 2023. During August, the plans lost market value of approximately $74 billion, on top of a net negative cash flow of approximately $10 billion.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.099 trillion as of August 31, 2023, up from $6.085 trillion as of July 31, 2023. 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
August’s market decline pushed two plans below the 90% funded mark as of August 31, 2023; 17 plans now stand above this benchmark compared to 19 at the end of July 31, 2023. Meanwhile, at the lower end of the spectrum, there were no changes in the number of plans below 60% funded, keeping the total number of plans under this mark at 23.
Figure 4: Funded ratios at August 31, 2023
About the Public Pension Funding Index
This update is an estimate based on Milliman’s 2022 Public Pension Funding Study and was updated for market returns from June 30, 2022, to August 31, 2023. The 2022 annual study encompasses adjustments made as of June 30, 2022, and reflects updated publicly available asset and liability information gathered for the annual study.