NASRA Survey Finds Public Plan Funding Declines Slowing

October 18, 2007 (PLANSPONSOR.com) - An annual study of the financial health of the nation's public pension plans found that pace of the decline in aggregate funding levels continued slowing in Fiscal Year 2006.

The Public Fund Survey, sponsored by the National Association of State Retirement Administrators (NASRA) and the National Council on Teacher Retirement, found that the FY 2006 funding mark for the public plans was 85.8%, down slightly from the 86.4% level of the prior year.  

The report said the rate of decline was sharp from FY 2001 to FY 2004 and then began slowing.

The public pension program aggregate funding ratio is projected to be higher in FY 2007 as growth in the actuarial value of assets is expected to exceed growth in the actuarial value of liabilities.

According to the report, 70 of the 118 plans in the survey sample not using the aggregate cost actuarial valuation method (59%) are funded at 80% or higher. The median funding level for the 118 plans is 83.5%.

Other findings in the FY 2006 data included:

  • The median annual public pension return was 11.8%, up from 10.3% in FY 2005.
  • Average asset allocation for 90 of the funds is 59.5% equities; fixed income 28.6%; 4.5% alternatives; 5.1% real estate; 2.3% cash and other. The most significant changes from the prior year were a reduction in equities from 60.3%, an increase in alternatives, from 3.8%, and and an increase in real estate from 4.5%.
  • The market value of system assets in the survey grew by 9.2% over FY 2005. This marks the fourth consecutive growth year following the decline in FY 2002. The data is for the 94 pension systems that have reported asset values for all six fiscal years. The current value of all assets represented in survey is $2.46 trillion.

The membership and assets of systems included in the survey represent more than 85% of the state and local government retirement system community, covering 13 million active members and 6.2 million annuitants.

The survey report is  here

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