US Public Pension Funds’ Funded Ratios Rise to Highest Levels in Nearly 4 Years
A robust 1.7% return in September raised the aggregate funded ratio of the 100 largest U.S. public pension funds to 85.4% from 84.2% in August, according to consulting firm Milliman’s Public Pension Funding Index.
The funded ratio for large public pension funds rose for the sixth consecutive month and reached its highest funded level since the end of 2021, when it was just 0.1 percentage points higher. Investment returns have also risen each month so far this year, except in March.
The total asset value of the plans rose to $5.657 trillion as of the end of September from $5.570 trillion a month earlier, as the funds registered approximately $96 billion in market gains, which far exceeded a net negative cash flow of approximately $9 billion. The returns also shrank the gap between estimated plan assets and liabilities to $971 billion from $1.043 trillion at the beginning of the month. It also was the first time the aggregate deficit fell below $1 trillion since the end of 2021, when the gap was $833 billion.
As a result of the strong monthly investment returns, which ranged from 0.9% to 2.7%, four additional plans are now more than 90% funded, which brings that total to 45, while 11 of the plans in Milliman’s index remained less than 60% funded. The total pension liability, which estimates the present value of all future pension benefits, grew to an estimated $6.628 trillion from $6.613 trillion the end of August.
Forecasting the funded level of plans in the index at the same time in 2026, Milliman provided three scenarios with three different estimates.
The baseline scenario assumed a 7% investment return, approximating most plans’ assumed rate of return; an optimistic scenario assumed a 14% gain; and a pessimistic outlook assumed no returns. Under the positive scenario, the average funded levels for the plans would rise to 92.7% by the end of September 2026. They would drop to 81.2% if the pessimistic scenario plays out. If the plans’ returns match the baseline scenario, Milliman estimated their funded level would increase to 87.0%.