The Pandemic Hit Public Pension Funds Hard — But Now They’re Better Funded Than They’ve Been in Years

The Covid-19 pandemic didn’t hit all U.S. public pensions funds equally.

Funds that were in the best financial health at the start of the pandemic took the hardest hit to their funded statuses over the course of the past year — but they’ve also benefitted most from the speedy recovery over the past 12 months, according to Goldman Sachs Asset Management’s public pension fund report for the first quarter of 2021.

这份报告是基于性能的样品of 99 public plans representing approximately $3 trillion of assets under management, found that a majority of the pensions experienced funded status declines of 10.1 to 12.5 percent in March 2020. Retirement plans which were well funded to begin with — at over 90 percent funded — experienced the largest decline in funded statuses from December 2019 to March 2020. Meanwhile, pensions that started off the pandemic with funding ratios below 70 percent experienced a single-digit median decline in funded status.

GSAM suggested that the trend in funded status declines was “likely influenced by varying allocations to fixed income.” Plans with the highest rates of decline in funded positions also allocated the lowest percentages of assets to fixed income.

Since the pandemic’s March 2020 lows, however, the aggregate funded status of public pension funds has rebounded. In March 2020, funds’ aggregate funded status dropped to 64 percent. Throughout the past year, that status has climbed back up, reaching 80 percent in March 2021.

“When you look at that funded level, not only is it up dramatically from the depths of Covid-19 prices, but it's really the highest funded status on a system-wide basis that we've seen since going back to the global financial crisis,” Michael Moran, senior pension strategist at GSAM, told亚博赞助欧冠.

How U.S. Pension Funds ‘Erased’ Losses

Plans that experienced larger declines in funded status may have “erased” losses and experienced “incrementally higher asset returns and funded status gains” as risk assets rallied through the latter half of the year, the report said.

“The same thing that caused volatility in their portfolios on the way down actually helped on the way back up,” said William Chang, pension strategist at GSAM. “When the pandemic hit last year, it was one of the quickest drawdowns, one of the quickest declines in equity markets. And the subsequent recovery and exit out of that bear market was equally as quick.”

在2020年3月底，计划资助状态的顶部四分位数约为81％至90％。根据该报告，到3月2021年，该数字增加到91到100％的资助状态。GSAM归因于改善大流行的效应：疫苗接种数量上升，初始失业索赔和消费者信心上升。

As for the future of U.S. public pension plans, an excerpt from the Brookings Institute, included in the report, said state and local pension plans will face “substantial” demographic headwinds. But, according to the Brookings analysis, these headwinds are likely to subside with time.

“People are living longer,” Chang said. “And these plans are still open to new participants. That pool of people who are participating in the plan and continuing to accrue benefits into the future is becoming larger over time.”