A Good Report on Health of Public Pensions

September 14, 2005 (PLANSPONSOR.com) - According to The National Association of State Retirement Administrator's Public Fund Survey, "…substantially all of underfunded public pension plans are able to meet their current obligations."

The survey of 103 public retirement systems with 127 public retirement plans found that 71% of the plans that report an actuarial funding ratio are 80% or more funded, the mark of good health cited by actuaries.   The average funding level of all plans in the survey is 85.2%.

Though the number of plans with a funding level below 80% rose from 30 to 35 in fiscal year 2005, NASRA points out that the largest five plans in the survey – California PERF, California Teachers, Texas Teachers, Florida Retirement System, and New York State Teachers – fall above the 80% funding level.

Other key findings of the survey include:

  • For the 108 plans that reported new valuation results for FY04, the annual median rate of growth for actuarial liabilities was 6.4%.   NASRA attributes this low growth rate to a reduction in the number of new benefit enhancements in recent years.
  • Since 2001, for the 93 plans who reported membership changes in FY04, the number of annuitants (retirees, beneficiaries, and disabilitants) increased by 13.1%, while the number of actives only increased 1.3%.
  • Total contributions to public pension funds increased about 12.5%, from $62 billion to $70 billion.   This does not include the $7.5 billion in bond proceeds distributed to three Illinois systems and the San Diego County system.
  • Total benefit payments rose about 8%, from $104 billion to $112 billion.
  • The combined median figures for investment and administrative expenses result in a median cost to administer the plans in the survey of less than one-third of one percent of assets.
  • For the 94 systems for which data is available, about 60.6% of assets are invested in equities, while 27.3% are invested in domestic fixed income vehicles.

The complete report from NASRA is  here .