US Pensions Reach 85% Funding as $1.37 Trillion Gap and AI Bets Raise Risk
Updated
Updated · asiaasset.com · Aug 4
US Pensions Reach 85% Funding as $1.37 Trillion Gap and AI Bets Raise Risk
2 articles · Updated · asiaasset.com · Aug 4
Summary
253 state and local pension plans reached an 85% funded ratio in Equable Institute’s 2026 survey, the strongest level since the post-2008 low, after average returns of 9.4% beat the 6.9% target.
$1.37 trillion in unfunded liabilities still hangs over the system, above Equable’s $1.27 trillion January forecast and only $210 billion better than 2009 despite 17 years of contributions and strong market gains.
Nearly 60% of public plans remain fragile or distressed, with wide state gaps from Georgia’s 93.5% funded level to Illinois at 56.4%; assumption changes, weak investments and contributions below debt interest are driving the shortfall.
At least 8% to 10% of pension assets are allocated to AI companies, with true exposure likely higher through private markets and external managers, leaving plans exposed if the AI boom reverses.
More broadly, Equable said public pensions have converged on growth-heavy strategies with limited countercyclical protection, while valuation risk has tripled since 2001 and now affects more than 27% of assets.