Wilshire Reports State Plan Funding Ratio Improvement

March 6, 2008 (PLANSPONSOR.com) - Things are looking up for state retirement plans, according to the latest annual study by Wilshire Consulting of the state of the plans' finances.

With 125 systems reporting data, Wilshire said it estimates that the average funding ratio for all the programs was 95% in 2007, up from an estimated 88% in 2006.

According to the Wilshire data, for the 56 state retirement systems that reported actuarial numbers for 2007, pension assets grew 14.7%, or $118.3 billion, from $805.9 billion in 2006 to $924.2 billion in 2007. Liabilities grew 6.8%, or $64.3 billion, from $948.8 billion to $1,013 billion

The dramatically faster pace in rising asset values compared with the continued steady growth in liabilities for the 56 state pension plans led to a significant reduction in the aggregate shortfall, as the $142.9 billion shortfall in 2006 narrowed to an $88.8 billion shortfall in 2007, Wilshire said.

For the 116 state retirement systems that reported actuarial data for 2006, pension assets and liabilities were $2,109.9 billion and $2,356 billion, respectively. The average funding ratio for all 116 state pension plans was 90% in 2006.

Of the 56 state retirement systems that reported actuarial data for 2007, 75% are underfunded. The average underfunded plan has an 82% funding ratio. Of the 116 state retirement systems that reported actuarial data for 2006, 77% are underfunded with an average 83% funding ratio.

State pension portfolios have, on average, a 69% allocation to equities – including real estate and private equity – and a 31% allocation to fixed income. The 69% equity allocation is notably higher than the 61% equity allocation in 2002. Thirty-eight of 125 retirement systems have allocations to equity that equal or exceed 75%, and three systems have equity allocations below 50%.

Wilshire forecasts a long-term median plan annual return of 7.6% which is 0.4 percentage points below the median actuarial interest rate assumption of 8%

.

Of these 125 retirement systems, 56 systems reported actuarial values on or after June 30, 2007 and 69 systems reported before June 30, 2007. Nine of these 69 late-reporting systems last reported before June 30, 2006.

More information is available at www.wilshire.com .

«