The overall estimated funding ratio of the 100 largest U.S. public pension plans has fallen to 75.3% as of August 31, down from 76.8% the previous month. This decline can be attributed to a decrease in overall market performance, according to the Milliman 100 Public Pension Funding index.
During August, public pension plans experienced an aggregate investment return of -1.6%, with a range estimated to be between -2.4% and -0.8%. This negative return has resulted in a decrease in the number of plans that are over 90% funded. Only 17 out of the 100 plans now meet this threshold, compared to 19 in the previous month.
However, the number of plans that are less than 60% funded has remained stable at 23. As of August 31, there were a total of 18 plans with funding ratios between 60% and 70%, an increase from 16 the previous month. Additionally, 21 plans were between 70% and 80%, an increase from 18, and 21 plans were between 80% and 90%, a decrease from 24.
The negative investment returns during August led to a decrease in estimated assets, which dropped to $4.591 trillion from $4.675 trillion in the previous month. On the other hand, liabilities grew to an estimated $6.099 trillion from $6.085 trillion.
These findings highlight the challenges faced by public pension plans in maintaining sufficient funding levels. While some plans have managed to remain well-funded, the overall trend indicates a decline in funding ratios. This underscores the importance of effective investment strategies and sound financial management for public pension plans to ensure the long-term sustainability of retirees’ benefits.
Source: Milliman 100 Public Pension Funding index