US' 100 largest public pension plans have second consecutive month of decline, decreasing estimated funded status
The trend of negative investment returns for public pensions continued in September which caused an erosion of funded status amounting to $128 billion, says the ‘Milliman 100 Public Pension Funding Index’ (PPFI).
September marked the second consecutive month of decline in financial markets which had decreased the estimated funded status of the 100 largest public pension plans in the US. From the 75.3 percent recorded in August, it had dropped to 73.2 percent by the end of September.
The deficit between the estimated assets and liabilities had increased from $1.508 trillion at the beginning of September to $1.636 trillion by the end of the month. In aggregate, it was estimated that the PPFI plans had return of investments by -2.6 percent with the estimated returns for individual plans ranging from -4.2 percent to -1.6 percent.
Lost market value
The Milliman 100 PPFI asset value was $4.591 trillion by the end of August and had decreased to $4.477 trillion by the end of September. The plans had also lost market value of around $104 billion along with a net negative cash flow of $10 billion in September.
The total pension liability (TPL) continued to grow and was estimated to be around $6.113 trillion by the end of September, which was an increase from the $6.099 trillion in the previous month. It is worth noting that as pension assets grow over time with investment income and decrease as benefits are paid, the TPL will do so as well while also growing as active members accumulate pension benefits.
The market decline in September had pushed one plan below the 90 percent funded mark by the end of the month. Sixteen plans stood above the benchmark, which was one number lower from the previous month. Two plans had fallen below the 60 percent funded mark. This brought the total number of plans under the 60 percent funded mark to 25, an increase from the 23 by the end of August.
The update in the PPFI was an estimate based on Milliman’s ‘2022 Public Pension Funding Study.’ It was updated for market returns from June 30, 2022, to September 30, 2023.
