U.S. public pension plans are facing investment losses approaching $1 trillion because of the economic fallout from the coronavirus, according to a report from Moody's Investors Service.
The losses could exacerbate the pension liability challenges that many state and local governments are already facing. Plus, the economic setback is reducing revenue levels and threatening the ability of municipal governments to afford these higher pension costs.
U.S. public plans are generally on pace for an average investment loss of about 21% for the fiscal year ending June 30, Moody's estimates.
"Without a dramatic bounce back of investment markets, 2020 pension investment losses will mark a significant turning point where the downside exposure of some state and local governments' credit quality to pension risk comes to fruition because of already heightened liabilities and lower capacity to defer costs," said Tom Aaron, vice president at Moody's, in a news release announcing the report.