According to the “Milliman 2012 Public Pension Funding Study,” the plans reported assets of $2.705 trillion and accrued liabilities of $3.6 trillion. The study independently measured the aggregate funded status of the pension plans using basic actuarial principles and reported plan liabilities and assets.
Using current market values of assets and current view on investment returns, these plans have assets of $2.513 trillion and accrued liabilities of $3.706 trillion, resulting in an aggregate underfunding of $1.193 trillion and an aggregate funded ratio of 67.8%.
In aggregate, the plans in the study are invested 50.8% in equities; 25.7% in fixed-income; 6.6% in real estate; 12.7% in a combination of private equity, hedge funds and commodities; and 4.2% in cash. There is considerable variation in the investment allocation from plan to plan. The greatest number of plans (40-plus) were 70% to 80% allocated to non-fixed income asset classes.
The reported $3.6 trillion in accrued liabilities consisted of $1.620 trillion for the 12.8 million plan members who are still working and another $1.980 trillion for the 10.9 million plan members who are retired and receiving benefits or who have stopped working but have not yet started collecting their pensions. In aggregate, the plans have assets sufficient to cover 100% of the accrued liability for retirees and inactive plan members, but just one-third of the assets to cover all of the accrued liability for active members. However, one-quarter of plans lack the assets to even cover the accrued liability for retirees and inactive members.
This study is based on the most recently available Comprehensive Annual Financial Reports and actuarial valuation reports, which reflect valuation dates ranging from June 30, 2009, to January 1, 2012; about two-thirds are from June 30, 2011 or later.
For the full report and a list of the 100 largest public pension funding statuses, click here.