Industry News

On September 29, 2020, the Center for Retirement Research at Boston College (CRR) released its issue brief, 2020 Public Plan Investment Update and COVID-19 Market Volatility.  The brief indicates that state and local pension plans outperformed their assumed return in fiscal year (FY) 2019 with an average return of 8.9% compared to the average actuarially assumed return of 7.2%.  However, in early 2020, the financial markets were severely affected by the COVID-19 pandemic and subsequent economic shutdown.

Other key findings include:

• Despite the financial market rebound, most public pension plans are projected to end FY 2020 with investment returns that fall below actuarial expectations.
• The market downturn that occurred due to the COVID-19 pandemic has elevated concerns about public plan liquidity and vulnerability since plans may be forced to liquidate assets at depressed prices.

The brief concludes, “Although many plans have a negative cash flow and may need to sell assets to pay annual benefits, most also maintain a consistent cache of U.S. Treasuries that could be easily liquidated if necessary. So, while public pension plans face many long-term fiscal chal­lenges, most are able to weather sharp downturns relatively unscathed.”

The brief’s analysis is based on the Public Plans Database (PPD), which consists of 118 state and 82 local pension plans that represent over 95% of the total U.S. state and local pension assets and membership.

The brief is available here.