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The U.S. public pension gap has tripled to at least $2 trillion in less than a decade, Moody's Investors Service said. In a report released Thursday, Moody's measured the unfunded liabilities for the 25 biggest public retirement systems between 2004 and 2012. The total future shortfall is more than half the size of the $3.7 trillion municipal bond market, which comprises all the outstanding debt issued by U.S. states and cities.
The gap has widened even though average investment returns over about the same period were 7.45 percent. The reason? Blame the Great Recession. In fiscal years 2008 and 2009, at the depth of the economic downturn, the plans' assets dropped nearly 22 percent cumulatively on average, Moody's said. Other contributing factors include inadequate contributions from plan sponsors and the burden of an aging population across the country.