The overall estimated funding ratio of the 100 largest U.S. public pension plans declined for the third month in a row in October, once again due to negative market performance, according to the Milliman 100 Public Pension Funding index.
The estimated ratio fell to 71.4% as of Oct. 31 from 73.2% a month earlier, driven by an estimated aggregate investment return of -1.9% during the period, with an estimated range of -2.8% to -1.1%.
With the third straight month of negative returns, the estimated ratio has fallen to the same point it stood 12 months earlier despite the market rally in the first half of 2023.
"The past 12 months have seen up-and-down performance — six months of growth and six months of losses — and while plan assets have grown, they have just kept pace with plan liabilities and the PPFI has seen no overall improvement in the aggregate funded ratio," said Rebecca Sielman, principal and consulting actuary at Milliman and author of the Milliman 100 Public Pension Funding index, in a Nov. 14 news release.
"At the end of October, only 12 of the plans were more than 90% funded, while 26 were below the 60% funding mark," she said. As of Sept. 30, Milliman estimated 16 plans were more than 90% funded, while 25 were funded at less than 60%.
Also as of Oct. 31, a total of 19 plans had ratios between 60% and 70% (up from 18 as of Sept. 30), 24 plans were between 70% and 80% (up from 23), and 19 plans were between 80% and 90% (up from 18).
As a result of the negative investment returns during October, estimated assets dropped to $4.38 trillion from $4.48 trillion a month earlier, while liabilities grew to an estimated $6.13 trillion from $6.11 trillion.