Industry News

On December 14, 2020, the American Academy of Actuaries (AAA) published its issue brief, The Impact of the COVID-19 Pandemic on Public Pension Plans. According to the brief, the pandemic may potentially affect plan contributions, investment returns and demographic experience. The intensity of the impact will likely vary substantially from plan to plan depending on the effects of the economic recession in the plan’s geographic region and the exposure of the plan’s participants to COVID-19.

Some plans may be forced to reduce expected investment returns due to budgetary pressures and low interest rates. As a result, it may be even more challenging for plan sponsors to make the needed level of contributions. The brief concludes, “Most public pension plans, however, will likely be able to absorb the short-term impacts of the pandemic. These plans may experience periods of increased contributions to return to full funding, particularly if any contribution shortfalls that arose during the pandemic are not made up in a relatively short amount of time, as the economy and tax revenues recover.”

The brief is available here.