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
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