Equable Institute Analysis: Performance of U.S. Public Pension Funds Improves in Q4

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Jan 08, 2025, 08:39 ET

A strong year of investment returns drives funded ratio to 80.2% at the end of the 2024 calendar year

NEW YORK, Jan. 8, 2025 /PRNewswire/ -- Today, Equable Institute released a year-end update to its State of Pensions 2024 report. The analysis finds the aggregate funded ratio for U.S. state and local retirement systems are on track to increase from 75.5% in 2023 to 80.2% in 2024, based on available data through December 31^st, 2024. Equable Institute estimates that unfunded liabilities will total $1.37 trillion for the 2024 fiscal year, compared to a high of $1.64 trillion in 2023.

Equable expects the aggregate funded ratio for U.S. state and local pension funds to improve from 75.5% in 2023 to 80.2% in 2024 due to strong investment returns.

The last few months of the 2024 calendar year saw strong investment performance, with state and local funds posting investment returns averaging 10.3%. These returns represent an overperformance of the average 6.87% assumed rate of return for pension funds. While this is positive news for pension funds, the 10.3% average return is lower than most major public equity indices like the S&P 500.

"A second straight year of positive investment returns for public retirement systems has been most welcome," said Equable executive director Anthony Randazzo. "But it's notable that even with markets at historic highs and strong pension fund investment returns, state and local retirement systems remain financially fragile. With only 80% of necessary assets in pension funds, there are significant contribution increases necessary to get more of today's $1.37 trillion in pension debt paid off before another financial crisis strikes."

While aggregate numbers have trended positively in 2024, the report finds that a majority of state and local retirement systems in the U.S. remain fragile or distressed.

The year-end update to State of Pensions 2024 also includes a ranking of estimated 2024 funded status for all 50 states plus Washington D.C.

The analysis reveals that Washington D.C. and Nebraska currently top the list with aggregate 2024 funded ratios of 112.5% and 108.5%, respectively. New Jersey, Kentucky, and Illinois, have the worst funded pension plans in the nation at the end of 2024.

STATES RANKED BY 2024 FUNDED RATIO
Rank	State	Funded Ratio	Unfunded Liability	Rank	State	Funded Ratio	Unfunded Liability
1	District of Columbia	112.5 %	-$1,403,077,888	42	South Carolina	69.0 %	$21,754,329,088
2	Nebraska	108.5 %	-$1,619,958,016	43	North Dakota	68.9 %	$3,408,814,592
3	Tennessee	107.9 %	-$5,273,603,584	44	New Mexico	67.8 %	$16,547,076,096
4	Utah	104.2 %	-$2,085,706,112	45	Vermont	66.5 %	$3,264,627,200
5	Washington	102.5 %	-$3,891,787,776	46	Connecticut	63.5 %	$33,233,213,440
6	Wisconsin	102.1 %	-$3,008,134,144	47	Hawaii	63.2 %	$13,875,644,416
7	West Virginia	100.4 %	-$81,263,616	48	Mississippi	57.0 %	$25,755,031,552
8	South Dakota	100.0 %	$0	49	New Jersey	56.6 %	$91,114,946,560
9	Minnesota	93.2 %	$7,086,123,008	50	Kentucky	54.1 %	$38,533,578,752
10	New York	92.8 %	$50,920,734,720	51	Illinois	51.6 %	$211,680,788,480
*Funded ratios are the aggregate of all statewide retirement systems and large municipally managed plans. Data is based on actual reported financial and Equable estimates based on benchmark returns for reported asset allocations.

A full ranking of all 50 states plus Washington, D.C. is available in the year end update to State of Pensions 2024.

To read the State of Pensions 2024 Year End Update, access interactive data visualizations, and download raw data, visit: http://www.equable.org/stateofpensions2024.

About Equable Institute
Equable is a bipartisan non-profit that works with public retirement system stakeholders to solve complex pension funding challenges with data-driven solutions. We exist to support public sector workers in understanding how their retirement systems can be improved, and to help state and local governments find ways to both fix threats to municipal finance stability and ensure the retirement security of all public servants.

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SOURCE Equable Institute