Industry News

On July 22, 2025, the Center for Retirement Research (CRR) at Boston College released its issue brief, The Funded Status of Public Plans Keeps Improving – Albeit Modestly. According to the report, the state and local pension funding ratio is projected to have increased to 77.7% in fiscal year 2025, up 1.5% over the last two years.

Other key findings include:

• The increase in the funded ratio indicates growth in assets from higher contributions and favorable returns as well as the realization of benefit reductions scheduled for new employees.
• The impact of these improvements is partially offset by: 1) negative cash flows in maturing pension plans; and 2) growth in benefit liabilities.

The report concludes, “The gradual improvement in the funded status of state and local pensions reflects gains in the fundamentals. These gains include more stringent calculations of actuarially required contributions and the increased likelihood of actually making the payment, as well as the ongoing effect of benefit cuts introduced after the Great Recession and the implementation of further cuts as new hires replace old employees. But, even if governments continue to contribute the full actuarially required contribution and investment performance remains mostly positive, we should only anticipate incremental improvements in funded ratios due to two persistent features of pension funds – the annual growth of liabilities and the impact of negative cash flows, associated with mature plans, on accumulated assets.”

The brief is available here.