U.S. Public Pension Funding Levels Continue Rising

Continued high interest rates and a strong stock market have benefited the funding levels of public pension funds in the U.S. over the past year, narrowing the gap between plan assets and liabilities.

The aggregate funded status of 241 city, county and state pension plans tracked by investment consultant Wilshire Advisors LLC increased by 0.5% to 83.7% in the second quarter of 2024.

The increase in funded status in the second quarter was due to a 1.3% increase in the value of plan assets, which was only partially offset by a 0.7% increase in liabilities. Over the trailing 12 months, the funded status of these plans increased 8.9%, up from 74.8% in June 2023. Year to date, the funded status of these plans rose by 3.8%.

Public plans tracked by Wilshire have seen their funded status continuously increase for most of the last year.

“This is the third consecutive quarter of increased funded status for U.S. state pension plans and represents the second highest quarter-end funded ratio since Wilshire began tracking data, offering hope for robust FYE ratios for many plans,” said Ned McGuire, a managing director at Wilshire, in a statement.

For the plans tracked by Wilshire, the firm assumes an asset allocation of 30% to U.S. equities, 13.5% to global equities, 15.5% to private equity, 21.5% to core fixed income, 4.5% to high-yield bonds and 15% to real assets. 30% to U.S. Equities, 21.5% to core fixed income, 15.5% to private equity, 15% to real assets, 13.5% to global equities, and 4.5% to high-yield bonds.