Milliman's Latest Insights: Public Pension Funds Surge to 82%

Milliman's Recent Analysis on Public Pension Funding

Milliman, Inc., a leader in global consulting and actuarial services, has unveiled its findings on the Public Pension Funding Index (PPFI), which evaluates the financial health of the nation's largest public defined benefit plans. This report comes after a period marked by impressive market performance.

Positive Trends in Public Pension Funding

In August, the funded ratio of the PPFI improved significantly, rising from 80.8% at the end of July to 82.0% by the end of August. This increase is a result of four consecutive months of positive market returns, with an estimated aggregate return of 1.5% for the PPFI plans during this month alone. Individual returns varied across different plans, ranging from 0.8% to as high as 2.5%.

Market Gains and Funded Status Improvement

Throughout the month of August, the overall market value of the PPFI plans surged by about $95 billion. However, it's noteworthy that a net negative cash flow estimated at around $10 billion tempered these gains. As a result, the gap between estimated plan assets and their promised liabilities narrowed from $1.210 trillion to $1.138 trillion. This transition represents a significant improvement in funded status, amounting to a $72 billion increase.

Expert Insights on Funding Levels

Becky Sielman, a co-author of Milliman’s PPFI, remarked, “Another strong market performance in August lifted the PPFI plans’ funding levels to 82%, approaching the PPFI high-water mark of 85.5% reached in December 2021.” This positive momentum in funding levels is vital for the sustainability of pension plans.

Plans Surpassing the Funding Benchmark

This strong market performance has facilitated a commendable uptick in the number of pension plans reaching critical funding benchmarks. In August, two additional plans crossed the 90% funding threshold, bringing the total to 29 plans above this level. Conversely, only 15 plans now fall below the 60% funding mark, highlighting a shift towards healthier funding ratios.

Looking Ahead: The Future of Pension Funding

As pension plans continue to navigate the complexities of funding and investment returns, the insights provided by Milliman are invaluable. Staying informed about the metrics affecting pension plans can aid stakeholders in making strategic decisions that will positively impact the longevity and reliability of these funds.

Engaging with Milliman's Insights

For those seeking more detailed information, consider exploring the full Milliman 100 Public Pension Funding Index. This comprehensive analysis not only sheds light on current funding levels but also offers a wealth of data pertaining to the performance of public pensions across various states.

Frequently Asked Questions

What is the Public Pension Funding Index (PPFI)?

The PPFI tracks the health of the nation's largest public defined benefit plans through funding ratios and financial metrics.

How did the funding ratio change in August?

In August, the funded ratio of the PPFI increased from 80.8% in July to 82.0% by the end of the month.

What factors contributed to the improvement in funding levels?

The improvement was driven by a fourth consecutive month of market gains and an estimated aggregate market return of 1.5% for PPFI plans.

How many plans are now above the 90% funding level?

Currently, 29 plans are above the 90% funding level, indicating a positive trend in public pension finances.

Where can I learn more about Milliman's pension funding studies?

Visit Milliman's website for comprehensive reports and analyses regarding annual pension funding studies and trends.

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Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.