August 22, 2020

US public pension plans face ‘vicious cycle’ as funding gap soars

Coronavirus, disappointing investment returns and declining interest rates, pose a triple threat to the health of the US public pension system, which is haemorrhaging cash and heading for a record funding shortfall.

The total funding gap for the 143 largest US public pensions plans is on track to reach $1.62tn this year, significantly higher than the $1.16tn recorded in 2009 in the aftermath of the global financial crisis, according to Equable Institute, a New York-based non-profit think-tank.

The weak financial condition of the US public pension systems poses severe risks for the living standards of millions of employees and retired workers.

Equable estimates that returns of US public pension plans averaged -0.4 per cent over the 12 months ended June 30, well below the 7.2 per cent targeted by these schemes.

This dire performance has contributed to the aggregate funded ratio (assets as a share of liabilities) sinking to 67.9 per cent, sliding towards the historic nadir of 63 per cent registered in 2009.

Just one in five statewide pension plans can now be classified as “resilient” with a funded ratio of 90 per cent or

She thought unemployment benefits were coming. Then, eviction loomed

She thought unemployment benefits were coming. Then, eviction loomed

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