PUBLIC HEALTH – Survey Finds Most Retirement Systems Healthy

August 22, 2000 ( - Public retirement systems are in good financial shape, according to a new survey conducted by the Public Pension Coordinating Council.

While pension obligations increased substantially since the 1997 survey, plan assets increased at a faster rate.  The ratio of assets to actuarial accrued liability rose to 95.8% from 87.2% just two years earlier.

According to BNA Pension and Benefits Daily, the “2000 Survey of State and Local Government Employee Retirement Systems” said benefits are typically calculated using formulas that include the employees’ years of service, age at retirement, and final average salary. 

Plans often include post-employment cost-of-living adjustments to plan members during retirement.

Happy Returns

The current annual rate of investment return was 14.48% compared with 13.37% in the prior period.  Asset allocations continued a shift from domestic bonds to equities. 

Also, real estate investments also declined, while investments in international stocks grew.

Actuarial assumptions for investment return remained essentially the same at about 7.88%, with just 4% using assumed returns less than 7.0% or greater than 9.0%. 

Approximately 76% of employees are covered under Social Security. Although most state and local plans don’t specifically integrate Social Security income into their benefit formulas, they often offer a higher annual benefit percentage to those not covered, partially offsetting the lower overall retirement income.

The report covered 246 public employee retirement systems and 371 retirement plans. 

This represents 85% of the 12.8 million active plan members reported by the Census Bureau, and 77% of the $2.3 trillion in public fund assets reported by the Federal Reserve.

Survey responses were obtained by the council’s participating members:

  • the National Conference on Public Employee Retirement Systems
  • the Government Finance Officers Association
  • the National Association of State Retirement Administrators
  • the National Council on Teacher Retirement

– Nevin Adams