Funded Level for U.S. Public Pensions Slips to 73.7% in May

The estimated funded level of the 100 largest U.S. public pension funds declined to 73.7% in May from 74.8% at the end of April, according to actuarial and consulting firm Milliman, which tracks public pension funded levels through its Milliman 100 Public Pension Funding Index (PPFI).

It was the eighth straight month when the plans’ funded ratio remained within the 70% to 75% range. Milliman noted that the relative stability of the funded levels is in sharp contrast to the period from March 31, 2020, through Sept. 30, 2022 when funded levels surged to 85.5% and then fell back to 69.8% before rising to their current levels.

In aggregate, the 100 plans in the index reported an investment loss of 1.0% during May, with individual plans’ returns ranging from a loss of 0.3% to a loss of 1.8%. As a result, the plans lost approximately $43 billion worth of market value. Combined with net negative cash flow of approximately $9 billion, the asset value of the Milliman 100 PPFI declined to $4.465 trillion at the end of the month from $4.517 trillion at the end of April. Meanwhile, the deficit between the estimated assets and liabilities increased to $1.590 trillion at the end of May from $1.524 trillion a month earlier.

The firm said the total pension liability of the public pension funds continues to grow, rising to an estimated $6.055 trillion at the end of May from $6.041 trillion the previous month. The firm also said that the minor market decline during May pushed one plan below the 90% funded mark, leaving 16 above this benchmark, compared with 17 the previous month. At the same time, the number of plans below 60% funded remained at 24.