Thursday, March 6, 2008

Report: Big Hike in State Retirement Plan Funding Ratios

Wilshire Associates’ annual state pension plan funding and asset allocation report indicates funded status of state retirement systems improved seven percentage points in 2007.

Wilshire estimated the aggregate asset-to-liability ratio of the 125 plans studied at 95% as of June 30, 2007, up from 88% a year earlier. The same plans were 95% funded in 2001 before slipping to 81% in 2002 and 2003, according to the report.

It remains to be seen whether funding ratio increases in 2007 will hold, because fiscal years ended June 30, just before equity returns began falling. “If we had the luxury of having instantaneous information … I don’t think there’s any question we’d see a deterioration of the 95% level of ’07,” said Steven J. Foresti, managing director at Wilshire and one of the study’s authors.

Wilshire forecasts that just 21 of the 125 state pension systems, or 16.8%, will meet or exceed their actuarial interest rate assumptions. “This is down noticeably from the 30 state retirement systems” expected in the 2006 report, the report states.

Predicted returns ranged from 5% for the lowest state plan to 8.2% for the highest.

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