According to the research report, for the 73 city and county retirement systems which reported actuarial data on or after June 30, 2008, pension assets and liabilities were $214.4 billion and $274.3 billion, respectively. The funding ratio for these 73 city and county pension plans was 78% in 2008, down from 96% for the same 73 plans in 2007.
The 73 systems which saw pension assets fall by 14%, or -$33.8 billion, from $248.1 billion in 2007 to $214.4 billion in 2008, while liabilities grew 6%, or $15.4 billion, from $258.9 billion to $274.3 billion. This led to a significant increase in the aggregate shortfall, from -$10.8 billion in 2007 to -$59.9 billion in 2008, the report said.
Of the 73 city and county retirement systems which reported actuarial data for 2008, 89% have market value of assets less than pension liabilities, or are underfunded. The funding ratio for all underfunded plans is 77%.
Wilshire found that city and county pension portfolios have a 63.6% average allocation to equities, including 39.4% to U.S. Equity, 15.8% to non-U.S. Equity, 6.5% to real estate, and 1.9% to private equity. The average 36.4% allocation to fixed income includes 27.3% to U.S. Bonds, 1.4% to non-U.S. Bonds, and 7.7% to other fixed income vehicles.
Asset allocation varies widely by city and county retirement system. Thirty of the 104 retirement systems have allocations to equity that equal or exceed 70%, and eight systems have equity allocations below 50%.
Wilshire said it forecasts an annual long-term median return on city and county pension assets of 7.2% – 0.8 percentage points below the average actuarial interest rate assumption of 8%. Using Wilshire’s long-term return and risk forecasts, only two of the 104 city and county retirement systems are expected to earn long-term asset returns that equal or exceed their actuarial interest rate assumption – down from the eleven systems that were expected to earn long-term returns that equaled or exceeded their actuarial interest rate assumption in last year’s report.
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