Equable Institute Analysis: U.S. Public Pension Funds Show Further Improvement in Q3 Due to Strong Market Performance

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Oct 09, 2024, 08:14 ET

2024 funded ratio rises to 81.4%; unfunded liabilities expected to decline to $1.29 trillion

NEW YORK, Oct. 9, 2024 /PRNewswire/ -- Today, Equable Institute released a mid-year 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 improve from 75.6% in 2023 to 81.4% in 2024, based on data available through September 30^th, 2024. Equable Institute estimates that unfunded liabilities will total $1.29 trillion for the 2024 fiscal year, compared to $1.63 trillion at the end of 2023.

Equable Institute estimates funded ratio for U.S. public pension plans will improve to 81.4% in 2024, as a result of strong market returns. However, Equable's researchers caution that retirement systems should not rely on market returns alone to reach full funding.

Strong market performance and record high contribution rates are driving positive funding trends in 2024. Preliminary investment returns average 9.5% for public pension plans, which is a marked overperformance compared to the average 6.9% assumed return target. However, there are long-term negative pressures blunting further improvement to public pension plans' funded status – most notably, growing benefit payments and record high negative cash flows.

"Public plans are benefiting tremendously from favorable public and private equity markets, in addition to higher, safer returns from the global interest rate environment," said Anthony Randazzo, Equable executive director. "The challenge for states is that this won't translate into lower contribution rates in the near-term due to unfunded liability persistence. If states can take this moment to continue elevating contributions into their pension funds to get pension debt paid off, then there is a chance they could move toward a resilient funded status. But if state leaders interpret this year's positive returns as an excuse to slow down on contributions, then they will remain stuck in pension debt paralysis."

To read the State of Pensions 2024 October 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