Recent market volatility has negatively affected the asset performance of several large US pension plans, and could be an early signal that fiscal 2016 returns will fall short of assumed targets for the second consecutive year and erase funding improvements seen in FY 2013 and 2014, Moody’s Investors Service says.
“We project unfunded pension liabilities on a reported basis will grow by at least 10% in fiscal 2016 under even our most optimistic return scenario,” Thomas Aaron, a Moody’s AVP — Analyst says in “Market Volatility Points to Growing US Public Pension Debt in 2016.”
Moody’s also states that 55% of pension plans in its sample are not receiving contributions from state or local governments that cover current benefit accruals and interest on existing unfunded liabilities. That, combined with poor investment performance, will make pension plan liabilities even larger.
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