Wilshire's 2012 Report on City & County Retirement Systems: Funding Levels and Asset Allocation estimates that the ratio of pension assets-to-liabilities, or funding ratio, for all 106 city and county pension plans included in the study increased to 80% in 2011 from 72% in 2010, said Russ Walker, vice president of Wilshire Associates and member of the firm’s Investment Research Group.
The 106 local government plans—which included large cities such as Boston, New York, Chicago and Los Angeles—were 95% funded in 2001, and grew to become nearly 100% funded in 2007. However, upon the financial crisis and the recession, funding steadily declined; between 2007 and 2009, plan funding fell from 100% to 68%.
For the 103 city and county retirement systems that reported actuarial data on or after June 30, 2011—the remaining three reported before that date—pension assets and liabilities were $367.8 billion and $461.1 billion, respectively.
“The strong growth in asset values combined with lesser growth in the value of liabilities for the 103 city and county pension plans led to a decrease in the aggregate shortfall, as the -$121.5 billion shortfall in 2010 contracted to a -$93.3 billion shortfall in 2011,” Walker added.
Ninety-three percent of the 103 systems that reported actuarial data for 2011 have market value of assets less than pension liabilities or are underfunded. The aggregate ratio of pension assets-to-liabilities, or funding ratio, for all underfunded plans is 73%.
“Asset allocation varies widely by city and county retirement system,” Walker said. “Twenty-nine of the 106 retirement systems have total allocations to equity that equal or exceed 7%, and 17 systems have equity allocations below 50%. The 25th and 75th percentile range for equity allocation is 56% to 71%.”