Wednesday, April 27, 2011

Survey:Public Pensions Recovering and Adequately Funded

A member funding survey for the National Conference on Public Employee Retirement Systems (NCPERS) shows public pension funds are experiencing a robust recovery from the historic market downturn of 2008-2009 – reporting strong investment returns, growing assets and more than adequate funding levels to meet their obligations.  The survey is one of the most comprehensive study of public pensions. In all, 216 public pension funds were surveyed, the vast majority – 83 percent – were local pension funds, while 17 percent were state pension funds.

Among the survey's key findings:
  • 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 percent, based on the most recently reported data. Funds participating in the study reported a 20-year average return of 8.2 percent.
  • Investment returns are the single most significant source of plan funding, comprising about 66 percent of fund revenue. Individual plan members are a significant source of plan funding, contributing 10 percent of plan revenue. Employer contributions comprise only 24 percent of plan revenue.
  • The vast majority of plans are managed responsibly and maintain strong funding levels. On average, public pension plans are 75.7 percent funded and continue to work toward full funding. According to its February 2011 report Enhancing the Analysis of U.S. State and Local Government Pension Obligations, Fitch Ratings considers a funded ratio of 70 percent or above to be adequate.

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