Annual Pension Report Data

Funding Health

Overview

Below is the national funding status over time, based on our sample of 316 public pension plans. Among these, 205 are state administered plans and 111 are local plans.

Funding Status Projection & Stress Test for FY2026

We made estimation for part of our data for FY2024. The funding status for FY2025 is estimated based on the performance of synthetic portfolios that share the plans’ risk and return characteristics, based on the plans’ historical investment performance. We then show what FY2026 will look like for these plans with a number of stress test scenarios, which assume a return shock of -20%, 10%, and 0%.

Figure 1: National Unfunded Liability Over Time

Figure 2: National Assets & Liability Over Time

Figure 3: National Funded Ratio Over Time

Let’s break down the MVA-based UAL to see how the pension debt is divided among state and local plans over time:

Figure 4: National Unfunded Liability Breakdown

Distribution of Funding Status

Here’s how the funding ratio distribution moved over the last 24 years

Figure 5: Distribution of Funded Ratios Over Time

Now, let’s zoom in 2024 and see the funded ratio distribution:

Figure 6: Funded Ratio Distribution - 2024

Discount Rate Sensitivity

Since public pension plans don’t use the same assumed rate of return to discount their liabilities, their funded statuses are not directly comparable. The below analysis shows how the plans’ funded ratios change when we adjust their discount rates to a common level.

Figure 7: National Unfunded Liability (Based on MVA) Under Different Discount Rates

Figure 8: National Funded Ratio (Based on MVA) Under Different Discount Rates

Figure 9: Distribution of Funded Ratios (Based on MVA) in FY2024 Under Different Discount Rates

Ranking Plans Based on Funding Status

The interactive table below shows all the pension plans in our sample from the best funded plans to the worst funded ones from FY2024 to FY2026 (estimated assuming a market shock). You can sort the table based on any column and search for any specific plan.

State Level

On the aggregate level for state pension, the best funded state is Tennessee with a funded ratio of 104%, and the worst funded state is Illinois with a funded ratio of 52%. The median state is Indiana with a funded ratio of 79%.

A variable width bar chart (with the width of the bar chart representing the size of each state’s accrued liability) could be a great visualization to show states’ funding status and their relative sizes simultaneously

Investment Performance

Overview

First, let’s look at the annual returns at the aggregate/national level.

Figure 11: National Public Pension Returns

In 2024, public pension plans in our sample earned an aggregate return of 10.07%.

Investment Performance and FY End Months

One issue with calculating aggregate returns like this is not all plans have the same fiscal year ends. Figure 12 shows that most plans concentrate around June and December, with a small number of plans end their fiscal years in March, April, August, and September.

Figure 12: Distribution of Public Plans Based on Fiscal Year End Months

Figure 13 visualizes the aggregate pension returns by fiscal year end months. You can see that the return differences among these groups can be significant.

Figure 13: National Public Pension Returns By FY End Months

Let’s zoom in 2024 and see how plans’ returns differed because of FY end months.

Figure 14: Public Pension Returns Distribution By FY End Months

The differences in one year are indeed significant. However, if we look at the average returns over the last 24 years, do FY end months matter?

Figure 15: Public Pension Average Returns (22-Year) Distribution By FY End Months

Investment Performance and Assumed Rates of Returns

Let’s compare the 24-year average returns with the average assumed rates of return over the same period:

Figure 16: National Average Return (24-Year) vs. National Average ARR

Let’s compare the ARR against not just the 24-year average return but also rolling 5-year, 10-year, and 15-year returns.

Figure 17: National Rolling Average Returns vs. National Average ARR

How about the distribution of plans’ ARRs vs plans’ average returns over the last 24 years?

Figure 18: Average Returns (24-Year) Distribution vs. ARR Distribution

How about adding the average returns over the last 15, 10, and 5 years to the mix?

Figure 19: Average Returns Distribution (Varying Periods) vs. ARR Distribution

Now, let’s show the distribution of “Excess returns”. Excess returns here are defined as the differences between the plans’ actual average returns and their ARRs.

Figure 20: Excess Returns (24-Year) Distribution

Figure 20 shows that 81.8% of the public pension plans failed to beat their latest ARRs over the last 24 years.

Investment Performance Benchmarking

First, let’s see how public pension funds performed compared to the popular S&P500.

Figure 21: Investment Return Benchmarking (S&P500)

Figure 22: Investment Return Benchmarking (S&P500)

The S&P500 alone may not be the appropriate benchmark for all plans. Let’s use a benchmark portfolio that combines both equity and fixed income assets.

Figure 23: Investment Return Benchmarking (60% Equity - 40% Fixed Income)

Figure 24: Investment Return Benchmarking (60% Equity - 40% Fixed Income)

Below is another benchmarking method that takes into account the risk & return profile of each pension fund.

Figure 25: Investment Return Benchmarking (Empirical)

Figure 26: Investment Return Benchmarking (Empirical)

Ranking Plan Investment Performance

The interactive table below shows all the pension plans in our sample from the best performing plans to the worst performing ones in terms of average returns over the last 24 years. You can sort the table based on any column and search for any specific plan.

Investment Performance Analysis

Is there a correlation between public pension investment performance in terms of excess returns and funded ratios? Figure 27 shows this relationship.

Figure 27: Correlation Between Excess Returns and Funded Ratios

The correlation is (statistically significant or not?), though it’s not particularly strong (0.28).

Is there a relationship between plan sizes and investment performance?

Figure 28: Correlation Between Plan Size and Average Returns

Figure 29: Correlation Between Plan Size and Average Excess Returns

Asset Allocation and Return Probability

Asset Allocation

How did the aggregate asset allocation change over time?

Return Probability Analysis

In this analysis, we will examine the return probability distribution for public pension plans over the next 10 and 20 years. To achieve this, we will use the target asset allocation data and the capital market assumptions survey published in 2025 by Horizon Actuarial Services. This survey provides expected returns, volatilities for various asset classes, and the return correlations between them. Using these inputs, we will calculate the expected risk and returns for each pension fund over the 10- and 20-year horizons. These calculations will then be used to generate 10,000 random simulations, enabling us to assess the probability distribution of returns for each pension fund. The same process will be repeated for the aggregate of all pension funds.

Figure 31 below shows the distribution of the simulated returns for the aggregate pension system.

Figure 31: Distribution of Simulated Returns for National Average Asset Allocation

Figure 32: Probabilities of Achieving Target Returns for National Average Asset Allocation

Figure 33: Probabilities of NOT Achieving Target Returns for National Average Asset Allocation

The tables below show the return probability analysis for individual pension plans based on their target asset allocations. The first table shows the probabilities of achieving the target returns, while the second table shows the probabilities of NOT achieving the target returns.

Contributions and Cash Flow Analysis

Contribution Rate Composition

Let’s look at the employer vs employee and normal cost vs amortization contribution rate breakdown.

Figure 34: National Average Contribution Rates Breakdown

Interactive table of contribution rates:

Net Amortization and Contribution Benchmarks

Net amortization = Amo payment - Interest on the unfunded liability (AVA)

Zero-net-amortization ER benchmark = ER normal cost + Interest on UAAL

This also means:

Zero-net-amortization ER benchmark = Total contribution - Net amortization - EE contribution

ER contribution benchmark = ER normal cost + ER amortization payment to amortize the previous UAAL over a specified period

Figure 35: National Average Employer Contribution Benchmarks

Net amortization and employer contribution benchmark table

Net Operating Cash Flow

Net Operating cash flow = Total Contribution - Total Benefit Payment

Net Operating Cash Flow table: