By: Russ Kamp, CEO, Ryan ALM, Inc.
Milliman has published an update for their Public Pension Funding Index (PPFI), which analyzes data from our nation’s 100 largest public DB pension plans, and the news continues to be positive!
For the seventh straight month, the PPFI funded ratio improved in October, rising from 85.4% as of September 30, to 86.3% as of October 31. This reading eclipses the previous mark of 85.5% set back in 2021. Since liabilities are “fixed” and not factored into month-to-month measurements, only the return on the PPFI funds’ assets determines the change in the funded status/ratio. October’s collective return was strong at roughly 1.0%.
As a result, assets within the PPFI increased by $64 billion leading to a decline in the deficit between plan assets and liabilities, which now stands at $907 billion. As a reminder, the liabilities are not measured using a market rate, as they are in valuing private DB pension plans. Given the current level of U.S. interest rates, public pension liabilities are likely understated.
Milliman launched the PPFI in 2016. Becky Sielman, co-author of the Milliman PPFI, stated that based on GASB accounting “only 10 of the 100 plans in the study are less than 60% funded while 46 plans are more than 90% funded and 19 of these have a funding surplus.” Given this improved funding, are public pension plans taking some risk from their asset allocations, which have gotten more aggressive with a significant shift into alternatives? I’d hate to see this improvement wasted by just continuing with the same old, same old.
According to this latest update by Milliman, they will be publishing the 2025 Milliman Public Pension Funding Study, an annual analysis of the funded status of the 100 largest U.S. public pension plans, sometime in December.
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