Yields on 20-year Treasury notes have dropped significantly amid the coronavirus driven downturn. At Thursday's close, yields were just under 1%, 71 basis points below their 100-day moving average.
With the bulk of public plan assets invested in equities, plans can expect funding ratios to get hit from both the asset and the liability sides. The benchmark rate's impact on discount rates will send liability present values higher as funding ratios will get no relief from assets. On the asset side of the equation, global equities, as measured by the MSCI All Country World index, are down about 16%. That's still an improvement over March 23's -31.8% year-to-date decline, but the drop will only magnify the problem for public plans.
The average plan funded status according to the Public Plans Database was 73.5% in 2019. The low-yield environment of the post-financial crisis era has kept liability present values low relative to the years before the crisis. Average funding ratios fell 5.1 percentage points between 2008 and 2009, and another 2 percentage points the following year to 74.7%.