Public Pension Funding Falls to 87.4%

Investment losses in September reduced the funded level of the 100 largest U.S. public pension plans from August's 89.0%.

Updated on Nov. 3, 2026 in Retirement Planning

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Milliman reported that the funded level of the 100 largest U.S. public pension funds declined to 87.4% as of September 30, down from 89.0% in August. Investment losses erased $112 billion in funding during the month.

Why it matters

The decline widens the gap between what public pensions hold and what they owe retirees, a shortfall that can pressure state and local budgets and retirement security. The drop shows how quickly market losses can reverse funding gains.

Plans posted an average 1.4% investment loss in September, with individual plan returns ranging from -3.4% to -0.5%, and the number of plans at 90% funded or higher fell to 47 from 51. Milliman's projections for September 2027 span a funded level of 83.4% under a no-return scenario to 92.7% under a 14% gain, but the report does not state which scenario is most likely.

The players

Milliman

Milliman is a global actuarial and consulting firm that publishes regular funded-status tracking reports on large U.S. public pension plans.

The details

Total asset value declined as plans lost about $87 billion in market value and recorded a net negative cash flow of roughly $8 billion during September, while total liabilities edged up to an estimated $6.944 trillion. The number of plans below 60% funded rose to 11 from 10.

August 31: Plan assets measured at $6.162 trillion.
September 2026: Plans posted a 1.4% average investment loss.
September 30, 2026: Funded level measured at 87.4%.
End of September 2027: Projected funded level under three return scenarios.

Market Dynamics

Milliman's Public Pension Funding Index, which tracks the 100 largest U.S. public pension plans, shows the September drop as a reversal of August's gain, underscoring how sensitive funded levels are to short-term market swings. The movement sits within a broader pattern in which plan funding depends heavily on investment returns rather than contributions alone.

Public pension shortfalls can lead governments to adjust contributions, benefits or budgets, which may affect retirees and taxpayers in the affected states and cities. Individuals planning their own retirement can compare how their savings respond to similar market losses, since plan funding levels are sensitive to investment returns.

The takeaway

Public pension funding can swing sharply within a single month when markets fall, so long-term funding health depends on sustained returns and steady contributions rather than any one period's gains. Individuals can apply the same lesson by keeping retirement savings diversified enough to withstand short-term losses.