Public Pension Funds Hit 5-Year High Funded Level

The average public pension fund’s funded status rose to a five-year high amid equity market strength, according to research by the National Conference of Public Employees Retirement Systems.

The annual NCPERS retirement study, which the organization has conducted since 2011, found that the funded level of the average public pension fund  reached 83.1% through the first half of calendar 2024, the fiscal years for these plans typically run July 1 to June 30. 

The report also found that discount rates, the plans’ assumed rates of return, have decreased to an average of 6.67% in the first half of 2024, down considerably from 7.31% in the first half of 2021. Over the past five, 10 and 20 years, public pension funds reported annualized returns of 7.15%, 6.24% and 6.88%, respectively.

“This robust dataset tells a clear story of resilience and strength,” wrote Hank Kim, executive director and counsel at NCPERS, in the report. “In the span of 20 years, public pensions have endured two major economic crises. Yet with strong governance policies and efficient practices in place, pensions have shored up funding levels and improved their long-term fiscal health.”

The plans surveyed by NCPERS, on average, have a 41.5% allocation to equities, 29.7% to alternative investments, 26.1% to fixed income and 2.7% to cash equivalents and other.

Approximately 67% of plan assets under management by survey participants are managed externally. Another 23% said they partially manage their assets in-house. Only 4% of respondents said they managed all assets in house, and another 5% said they took other approaches.

Looking ahead, the report found that some of the biggest priorities in 2025 for these pension funds include improving their cybersecurity, sustaining their pension funding levels, updating their pension administration systems and determining the role of artificial intelligence in pension management.

NCPERS surveyed 201 public pension funds between September 19 and November 14, 2024. Survey respondents collectively manage $3 trillion in assets. Approximately 89% of respondents were sponsors of defined benefit plans, 10% were combined defined benefit/defined contribution plans, 7% sponsored defined contribution plans and 1% sponsored cash balance plans.