The 100 largest U.S. public pension plans tracked by Milliman ended July with a combined funded ratio of 88.2%, down from 88.7% at the end of June, according to the firm’s Public Pension Funding Index published August 27, 2026. The gap between what those plans have set aside and what they have promised to pay grew to $816 billion during the month, up from $778 billion in June. For someone already drawing a pension check, the monthly number is less a warning about this month’s payment than a gauge of how much cushion a plan is carrying for the years ahead.
A Second Straight Month of Slippage
Milliman attributed the July decline to an estimated aggregate investment return of negative 0.1% across the plans in the index, matching the negative 0.1% return recorded in June. A roughly $13 billion drop in market value, combined with a net negative cash flow of about $8 billion as benefit payments continued to outpace new contributions, produced an estimated $38 billion loss in funded status for the month, per the firm’s analysis.
The decline followed a year that has otherwise run positive. The same index has posted an aggregate return of 6.1% for 2026 through July, meaning two weak months have not erased the gains built up earlier in the year. Total pension liability across the tracked plans grew from $6.894 trillion to $6.911 trillion during July, a reminder that the gap can widen even in a month when losses are relatively small, simply because the amount owed keeps climbing.
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Why the Funded Ratio Doesn’t Equal a Missing Check
The funded ratio compares plan assets to the present value of benefits already promised to current and future retirees, not to a bank balance that must hold the full amount today. Public pension plans are generally required to keep paying benefits to people already collecting them regardless of the funded ratio in any given month, since ongoing contributions from employers and employees continue flowing in alongside investment returns. Milliman’s analysis estimates that public employers and employees will contribute a combined $289 billion to these plans between July 2025 and June 2026.
Discount-rate assumptions also play a role in how the liability side of the ledger moves from month to month. Pension liabilities are calculated as the present value of future payments, using an assumed rate of return the plan expects to earn over decades. Small shifts in market interest rates or in a plan’s own assumed rate can move the liability figure even when nothing about the underlying benefit promises has changed, which is part of why liabilities grew from $6.894 trillion to $6.911 trillion in a single month.
The Real Exposure for Someone Already Collecting a Check
That structure is why a dip from 88.7% to 88.2% does not translate into a missed or reduced check for someone currently drawing a pension. The more relevant question for a retiree is what a sustained, multi-year decline in funding tends to trigger further down the line, since pension boards and state legislatures typically respond to persistent shortfalls with changes aimed at future costs rather than benefits already being paid.
Those responses have historically included raising the share of salary that current employees contribute toward their own future pensions and adjusting benefit formulas for people hired after a certain date, reforms the National Association of State Retirement Administrators has tracked across a number of state and local systems. Some plans facing persistent shortfalls have also reconsidered automatic cost-of-living increases for people already retired, a lever NASRA separately tracks across public pension systems nationwide. Neither type of change directly touches a check already being paid, but both shape how secure a retiree’s future increases are likely to be.
A National Average, Not Any One Plan’s Story
The $816 billion shortfall is a snapshot of the entire tracked group, not evidence that every one of the 100 plans is in the same position. Milliman’s index has long shown a wide spread between the best-funded and worst-funded systems in its universe, with some public pension plans sitting well above 100% funded while others carry ratios far below the 88.2% average. A retiree’s actual exposure depends far more on the specific funded status and governing rules of the plan paying that individual’s check than on the national aggregate reported each month.
For someone weighing how closely to follow these monthly reports, the more useful habit is tracking the trend across several months rather than reacting to any single data point. Milliman has published this index monthly for years, giving retirees and plan participants a consistent yardstick for comparing where a given month’s funded ratio sits relative to the same period in prior years, rather than judging the health of a pension system off one report in isolation.
A single month of data, even a second consecutive decline, does not establish a trend on its own. The same index that showed funded status falling in June and July also showed a 6.1% aggregate return for the year overall, underscoring how much month-to-month volatility sits underneath an annual figure. Milliman’s next monthly update, covering August, will show whether the slide continues or whether markets recover enough to narrow the $816 billion gap back toward where it stood at the start of summer.
This article was produced with AI assistance and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
