By: Russ Kamp, CEO, Ryan ALM, Inc.
Milliman analyzes data from the nation’s 100 largest public defined benefit plans and publishes that information through the Public Pension Funding Index (PPFI). They have recently released output from the index through March 31, 2025. The PPFI funded ratio fell in March from 81.1% as of February 28, to 79.5% as of March 31, following two rather benign months to begin 2025.
Milliman has assigned blame for the decline in the plans’ funded ratios to the uncertainty related to trade and tariff policies as the key drivers to the negative result. The 100 public plans experienced an estimated combined monthly return of -1.6%. According to Milliman, “individual plans’ returns ranged from -3.1% to -0.1%”. The -1.6% aggregate return created Investment losses totaling $83 billion while bringing total assets for the PPFI plans to $5.2 trillion in assets as of March 31.
Public pension plan liabilities grew during the month (at the ROA and not a true discount rate), from $6.52 trillion at the end of February to $6.54 trillion at the end of March. The funding gap between plan assets and plan liabilities expanded to $1.34 trillion as of March 31.
Regrettably, five plans fell below the 90% funding mark, leaving only 25 plans above this funding threshold, while another 12 plans are less than 60% funded (UGH!). I suspect that many of the plans with funded ratios at or above 90% actually have funded ratios below that threshold when a market-based discount rate is used given that Milliman estimated the discount rate for private plans was 5.49% in their March 2025 update. A higher discount rate reduces the present value of those future promises.
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