Equable Institute Analysis Finds U.S. Public Pension Funding to Improve in 2025 Despite Underwhelming Returns

Public pension funded ratio rises to 81.4% driven by record-high contribution rates.

NEW YORK, July 16, 2025 /PRNewswire/ -- State and municipal retirement systems are expected to experience an improvement to the national average funded ratio in 2025, according to Equable Institute's State of Pensions 2025 report. Record-high contribution rates in 2025 will offset this year's underwhelming 5.41% investment return, improving funded ratios and unfunded liability levels. Equable estimates that the aggregate funded ratio for U.S. state and local pension funds will rise to 81.4% in 2025, up from 78.3% in 2024. Unfunded liabilities are expected to decrease from $1.51 trillion in 2024 to $1.35 trillion in 2025.

For pension funds, the first half of 2025 was marked by the sudden plunge in global markets triggered by aggressive tariff announcements from the Trump administration that wiped out hundreds of billions in pension fund assets. Though markets rebounded following a rollback of these policies, Equable's latest analysis highlights the fragility of pension portfolios in the face of political volatility.

"As long-term investors, public pension funds generally held their asset positions through April's market volatility, allowing assets to recover," noted Equable Executive Director Anthony Randazzo. "However, this wasn't the success of portfolio diversification so much as it was simple fortune that political pressure on the Trump Administration led to enough policy reversal that markets responded favorably. This reflects a political fragility that public plans have in addition their already existing fiscal fragility and there is no easy fix to change that reality."

Equable's analysis concludes that the state of pensions remains fragile in 2025. Specifically, the report finds:

• Preliminary 2025 investment returns for state and local plans are 5.41% on average, through June 30, 2025. Most public pension plans are projected to underperform their assumed return targets (6.87% on average).
• Pension fund allocations to private capital decreased slightly year over year from 13.7% in 2023 to 13.4% in 2024 — a reported value of $731.9 billion as of 2024. The share of pension fund investments that are exposed to valuation risk is now 25.6% in 2024, down from 27.9% in 2023, due primarily to lower real estate asset values. Investments in all alternatives currently account for 31.7% of assets.
• Employer contribution rates are above 30% of payroll on average for the fourth year in a row, reaching a record-high of 31.65%. More than two-thirds of those costs are for unfunded liability payments.
• The increased level of contributions has begun to reduce the amount of interest on the debt as a as a contributing factor to cumulative national unfunded liabilities (measured through 2023). Equable anticipates that larger contribution rates seen in 2024 and 2025 will contribute to further reduction of interest on the debt among the factors causing today's 2025 unfunded liabilities.

The report, State of Pensions 2025, analyzes trends in public pension funding, investments, contributions, cash flows, and benefits for 245 of the largest statewide and municipal retirement systems in all 50 states (e.g., retirement plans with at least $1 billion in accrued liabilities).

For a deeper look into The State of Pensions 2025, visit http://www.equable.org/state-of-pensions-2025 to access additional downloads and interactive data visualizations. Media tools including figures and raw data can be found here.

About Equable Institute
Equable is a bipartisan non-profit that works with public retirement system stakeholders to solve complex pension funding challenges with data-driven solutions. We exist to support public sector workers in understanding how their retirement systems can be improved, and to help state and local governments find ways to both fix threats to municipal finance stability and ensure the retirement security of all public servants.

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SOURCE Equable Institute