Equity Gains Boost U.S. Public Pension Funding Status, Says Milliman

The 100 largest public pensions’ aggregate funded level now totals 74.7%, as of the end of November, advancing from 71.6% the prior month.

Strong market gains during October and November helped the estimated funded levels of the 100 largest public pension plans in the U.S. rebound to 74.7%, as of Nov. 30, from 71.6% a month earlier, according to consulting firm Milliman’s public pension funding index. It was a sharp turnaround from September, when poor market performance  erased more than five percentage points from the funded ratio during the month alone.

The aggregate asset value of the pension funds increased by approximately $158 billion to $4.225 trillion as of the end of October, then increased by approximately $200 billion to $4.417 trillion as of the end of November. The gap between the estimated assets and liabilities for the pension funds narrowed to $1.496 trillion at the end of November, from $1.808 trillion at the beginning of October, thanks in large part to investment returns of 2.8% and 4.7% in October and November, respectively.

The improved funded levels moved seven of the 100 plans above the 90% funded mark, as of the end of November, to bring the total to 19 plans, compared with 12 at the end of September. However, this is still far below the 46 plans that were more than 90% funded at the end of 2021.

At the same time, another seven plans moved above the 60% funded level, lowering the total number of plans under the threshold to 24 from 31 as of Sept. 30. However, this is still more than the 18 plans with funded levels below 60% at the end of 2021.

“Market improvements over the past two months pushed seven plans above the 90% funded mark as of Nov. 30—a reversal from September, when seven plans slipped below this milestone,” Becky Sielman, author of Milliman’s report, said in a statement. “Nineteen plans are now more than 90% funded, and while this is still well below the 46 plans at this level at the end of 2021, it points to an overall positive trend in public pension plan health.” 

The total pension liability grew to an estimated $5.913 trillion, as of November 30, from $5.883 trillion on Sept. 30 and $5.898 trillion at the end of October.

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