Public pensions are well funded — and they want to keep them that way.
New data from the National Conference on Public Employee Retirement Systems (NCPERS) show that sustaining funding levels is the top priority for most public pension allocators for 2026.
“There’s a core understanding that you can’t muck around with funding levels,” said Matt Eckel, director of research for NCPERS.
In a survey of 149 U.S. public pension allocators conducted in the fall of 2025 (before the war in Iran), 70.4 percent cited sustaining funding levels as their top priority for 2026, followed by improving pension administration systems (55.7 percent) and cybersecurity and fraud prevention (54.8 percent).
According to Eckel, public pensions “are in a strong, stable position,” with funded ratios improving by nearly three points and solid investment returns across the board. Survey results from the Washington-based nonprofit trade association for public sector pension funds show that disciplined funding policies — particularly maintaining consistent contribution levels — are paying off.
Strong prior-year investment returns and increased employer contributions have led to an upward trajectory in funded ratios. Funding ratios for plans that submitted data for both the first half of 2024 and 2025 improved by 2.9 percentage points. Systems that received their full contribution reported funded ratios averaging 6.6 percentage points higher than those that did not, consistent with last year’s findings.
“Discipline is paying off for the plans that maintain it,” Eckel told Institutional Investor over video.
As Eckel explained it, the survey results tell a consistent story of improving governance, realistic market assumptions, and increasingly sophisticated investment strategies. Compared to a couple of decades ago, there’s now a core understanding among public pension allocators that they can’t mess around with funding levels.
“The overall picture is of an industry that’s thinking carefully of financial sustainability as well as operational integrity,” he said.
Strong returns were also a tailwind for responding plans. Public pensions with fiscal year-end dates in the first half of 2025 reported average annual investment returns of 10.2 percent net of fees and 10-year returns of 7.5 percent. Real estate also showed a positive return for the first time in years.
The average funded ratio for the 47 responding systems with fiscal year-end dates in the first half of 2025 dropped to 79.2 percent from 81.4 percent for the same period in 2024 due to market volatility and fluctuations within the makeup of the survey sample.
For the first time this year, NCPERS asked respondents about layered amortization. a growing number of systems (24.4 percent) are using layered amortization. Survey results show that amortization periods averaged 18.6 years for systems with fiscal year-end dates in the first half of 2025.Additionally, public pensions remain cost-efficient compared to most investment vehicles, and while the discount rate dipped slightly, it reflects a realistic, responsible calibration with long-term return expectations.
The large majority of public pension systems manage some or all of their assets externally, with only 12.8 percent of this year's respondents managing all of their assets in-house (63.3 percent of respondents manage the entirety of their portfolios via OCIO).
