Most public pension plans will finish the fiscal year ending June 30 with negative returns, reduced asset values, lower funding ratios and higher actuarial costs if markets remain at their current levels until June, estimated the Center for State and Local Government Excellence in a report released Tuesday.
The report found that the funding ratio of assets to liabilities for public plans dipped to 69.5% in 2020 from 71% in 2019. The report estimates that this might raise the average actuarially determined contribution to 19.7% of payroll from 18.8%.
As of mid-April, only half of the center's sample of roughly 200 state and local government pension plans had reported their 2019 funding levels. None had reported 2020 levels.
The data show that the average funding ratio for public plans will steadily decline from 2020 to 2025. However, most plans will have enough assets to pay benefits indefinitely even if markets don't fully recover until 2025.
The report forecasts that all plans — even the lowest funded — will remain solvent over the next five years. However, a few are projected to exhaust their assets soon after.
The estimated average funding ratio for the 20 worst-funded plans is currently 38.5%. If markets don't recover fast enough, that average funding ratio will drop to 31.5% in 2025, while the six worst-funded plans — Charleston (W.Va.) Firemen's Pension and Relief Fund, Kentucky Employees Retirement System, Chicago Municipal Employees' Annuity & Benefit Fund, Chicago Policemen's Annuity & Benefit Fund, Providence Employee Retirement System, and New Jersey Teachers' Pension and Annuity Fund — will have funding ratios of 25% or less.
