Investing January 30, 2024

US Public Pension Plans Ended 2023 at Funding High

Late-year stock market rally drove a $349 billion increase in the 100 largest U.S. public plans’ funding, per Milliman.

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As markets rallied during November and December, so did the funded status of the 100 largest U.S. public pension funds, which ended 2023 at their highest point of the year, 78.2%, according to consulting firm Milliman.

The market rebound helped spur a combined $349 billion increase in funding. The aggregate funded level of the plans, as tracked by Milliman’s Public Pension Funding Index, rose to that 78.2% figure from 75.9% at the end of November and 72.4% at the end of October.

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“The late-year rally pushed nine more plans above 90% funding so that 21 plans stood above this key benchmark as of December 31—a big jump from the 12 we saw as of October 31, 2023,” Becky Sielman, co-author of Milliman’s PPFI, said in a release. “On the other end of the spectrum, 11 plans moved above 60% funding, leaving only 15 of the 100 plans below this level, compared with 26 at the end of October, a good sign for the overall health of public pensions.”

The plans earned estimated investment returns of 5.2% and 3.3% in November and December, respectively, with returns for individual plans ranging from 2.5% to 7.7% in November and 1.7% to 5.0% in December. The total asset value of the plans increased to $4.857 trillion as of the end of December from $4.704 trillion at the end of November and $4.480 trillion at the end of October.

The market value of the plans increased by approximately $233 billion during November, offset by $9 billion in net negative cash flow, and by approximately $162 billion during December, again offset by $9 billion in net negative cash flow.

The total pension liability grew to an estimated $6.213 trillion as of the end of 2023, up from $6.199 trillion at the end of November and $6.185 trillion at the end of October.

Milliman also projected how aggregate funded status will fare in 2024 under three scenarios. A baseline scenario assumes each plan’s future investment returns will equal its current reported interest rate assumption, with a median rate of 7.0% used for the projections. While “optimistic” and “pessimistic” scenarios assume each plan’s investment returns will be either 7% higher or lower than its interest rate assumption.

Under the baseline scenario, Milliman projects the aggregate funded ratio of the 100 plans would end 2024 at 79.5%, while under the optimistic and pessimistic scenarios, it projects the funded level to end the year at 84.8% or 74.2%, respectively.

Deals and People January 30, 2024

Empower Names Former Fidelity Exec to New Enterprise Role

Dave Gray has been named executive vice president of enterprise solutions to expand customer offerings.

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Dave Gray

Empower has named Dave Gray to a new role of executive vice president for enterprise solutions, overseeing the expansion of platform and partnership solutions for the recordkeeper and wealth manager. 

Gray joins the company from Fidelity Investments, where he was head of workplace products and platforms, including employer-sponsored retirement benefits and brokerage solutions through the workplace.  

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His role at Empower, which started on Monday, includes working on its platform and partnership solutions in support of “the next phase of enterprise growth” and leading the company’s “enterprise data strategy with the goal of expanding and enhancing Empower’s portfolio of offerings to customers.” 

Empower, the country’s second-largest recordkeeper after Fidelity, is making a push into consumer wealth management with its Empower Personal Wealth division, the result of a rebranding last year to build off the firm’s 2020 acquisition of Personal Capital.  

Gray reports to Empower President and Chief Operating Officer Rich Linton.  

“With Dave’s experience in the financial services industry and proven track record driving results, this role uniquely positions him to help Empower provide holistic solutions for our customers to help them achieve higher levels of success,” Linton said in a statement. “As our clients’ needs change, we need to change along with them, and I am confident Dave will be an integral part of that.” 

Gray has more than 20 years of experience in retirement services, including platform modernization and product development. Prior to his role at Fidelity, he was head of product, client experience and business strategy at Charles Schwab. He was also head of client service at The Standard.  

Empower, owned by Great-West Lifeco U.S. LLC, has noted in earnings calls the importance of its proprietary dashboard used by workplace participants in connecting them with broader financial offerings. The firm’s workplace solutions business accounts for 85% of its revenue, and personal wealth makes up the other 15%, according to a June 2023 earnings presentation. 

“Empower has seen tremendous success and continues to innovate,” Gray said in a statement. “I am looking forward to being part of their team and helping contribute to their customers’ needs. There is so much potential in this market, and I’m proud to join an organization that is truly making a difference.” 

Gray has taken a leadership role within multiple influential industry organizations, including the U.S. Department of Labor ERISA Advisory Council, an appointment that ended last year, and the boards of the Employee Benefits Research Institute, which ended in 2021, and the board of Portability Services Network LLC through this month, according to LinkedIn.  

Empower currently administers about $1.4 trillion in assets for more than 18 million people through retirement plans, advice, wealth management and investments. 

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