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Pension funds

Moody’s: Public pension liabilities unlikely to get reprieve over next 3 years

U.S. public pension funds' unfunded pension liabilities are expected to rise through 2020, even under positive investment return scenarios, said a report Tuesday from Moody's Investors Service.

In its report, Moody's ran a sample of 56 plans with $778 billion in aggregate reported net pension liabilities through three different investment return scenarios. Due to reporting lags, most 2019 pension results appear in governments' 2020 financial reporting, Moody's noted. The plans had $1.977 trillion in trillion assets.

Under the first scenario with a cumulative investment return of 25% for 2017-'19, aggregate net pension liabilities for the 56 plans fell by just 1%. Under the second scenario with a cumulative investment return of 19% for 2017-2019, net pension liabilities rose by 15%. Under the third scenario with a 7.2% return in 2017, -5% return in 2018 and zero return in 2019, net pension liabilities rose by 59%.

In 2016, the 56 plans returned roughly 1% on average and would have needed collective returns of 10.7% to prevent reported net pension liabilities from growing.