A new issue brief from the Center for State and Local Government Excellence, The Funding of State and Local Pensions: 2014-2018, finds that the funded status of public pensions has increased from 72 percent in 2013 to 74 percent in 2014.
There are two reasons for the improvements, according to the analysis by Alicia Munnell and Jean-Pierre Aubry:
- Positive stock market performance for the last five years allows the low returns of 2009 to be replaced with a positive year in plans that smooth their market gains and losses over five years; and
- Higher payments of the required annual contribution by state and local governments, increasing to 88 percent in 2014 compared to 82 percent in 2013.
The analysis is based on the 150 largest state and local pension plans in publicplansdata.org. The authors project that plans will be over 80 percent funded by 2018 if the portfolio achieves its assumed rate of return, currently averaging 7.6 percent nominal. Should investment returns fall below that level, e.g., to 4.6 percent, then plan assets would level off at 77 percent in 2015.
Read the full brief at http://slge.org/publications/the-funding-of-state-and-local-pensions-2014-2018
See Also:
- Corporate Pension Plans Break Funded Status Streak
- NYC Pension Funds Pay $2 Billion in Fees for $40 Million Return
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
