Despite weak short-term investment experience in 2008 and 2009, the long-term investment discipline of fund managers has produced an average one-year return of 13.5%, based on the most recently reported data. Funds participating in the study reported a 20-year average return of 8.2%.
The study found that investment returns are the single most significant source of plan funding, comprising about 66% of fund revenue. Individual plan members are a significant source of plan funding, contributing 10% of plan revenue. Employer contributions comprise 24% of plan revenue.
NCPERS said in a press release that although media coverage has focused on a handful of troubled funds, the vast majority of plans are managed responsibly and maintain strong funding levels. On average, public pension plans are 75.7% funded and continue to work toward full funding.
“There is no question that, with a very few but well-publicized exceptions, public pension plans are healthy, public pension plans are economically efficient and public pension plans are making the changes necessary to ensure their long-term sustainability,” said Hank Kim, Esq., NCPERS Executive Director & Counsel, noting that some recent studies relying on older data have dramatically overstated the financial challenges to public pensions.
In all, 216 public pension funds covering nearly 7.6 million active and retired public employees and with assets exceeding $900 billion were surveyed. The vast majority – 83% – were local pension funds, while 17% were state pension funds. The survey can be downloaded from http://www.ncpers.org/News/?newsid=134.According to the press release, this is the first phase of the NCPERS/Cobalt Community Research study. Still underway is a comprehensive review of the changes public pension funds have made or plan to make to benefits, plan design, operational practices, oversight practices and member engagement practices. The full report will be completed in late Spring 2011.