State Pensions at Lowest Funded Level in 30 Years

Negative returns for most asset classes caused by COVID-19’s stress on the financial markets caused an estimated 12.2 percentage point drop in Q1 2020.

The aggregate funded ratio for U.S. state pension plans decreased by an estimated 12.2 percentage points during the first quarter of 2020, ending the quarter at 62.6%, according to Wilshire Consulting.

“The first quarter’s decrease in funded ratios was driven by stress in the financial markets due to the COVID-19 pandemic, particularly in March. For most asset classes, returns were negative for the quarter,” says Ned McGuire, managing director and a member of the Investment Management & Research Group of Wilshire Consulting. “The first quarter’s funded ratio is now at its lowest level in the 30 years that Wilshire has been aggregating data for state pension plans.”

The quarterly change in funding resulted from a 15.7% decrease in asset values and a 0.7% increase in liability values. The aggregate funded ratio is estimated to have decreased 9.3 percentage points for the trailing 12 months.

The aggregate figures represent an estimate of the combined assets and liabilities of state pension plans included in Wilshire’s 2020 state funding study. The funded ratio is based on liabilities, service cost, benefit payments and contributions in-line with Wilshire’s 2020 state funding study. The assumed asset allocation is 29% U.S. equity, 18% non-U.S. equity, 10% private equity, 22% core fixed income, 15% real assets and 6% high-yield bonds.