Public pension funds saw returns of around 11.4% in 2022, a decrease from the 14% reported a year prior, according to a new survey by the National Conference on Public Employee Retirement Systems (NCPERS)
The “NCPERS 2023 Public Retirement Systems Study,” which fielded responses from 195 state and local government pension funds (56% of which are local and 44% statewide), found that public pensions’ average funded level rose to 77.8% from 74.7% in 2021. Social Security eligible funds reached an overall 80% funded level.
Retirement benefits trends
On the topic of retirement, NCPERS found more plans are offering defined contribution (DC) plans (24%), deferred compensation plans (50%), and combination plans (24%), and less are providing defined benefit (DB) plans (86%). More are also considering cost-of-living adjustment (COLA) changes (18% total) and deferred retirement option plans (DROP) (4%).
Respondents were generally assured on their financial futures. When asked, “How satisfied are you with your readiness to address retirement trends and issues over the next two years?” respondents gave an overall confidence rating of 7.8 out of 10. Overall, average confidence grew from 7.8 to eight out of 10.
Funds were also asked on the role environmental, social, and governance (ESG) factors have in their investment decisions, finding that nearly 54% of respondents believe ESG is somewhat or very important in their investment decisions.
COLA averages increased to 2.0%, up slightly from 1.7% in 2021. NCPERS points out that a majority of responding funds did not offer a COLA during the most recent fiscal year.
Plan design changes
In 2022, 60% of plans lowered the actuarial assumed rate of returns, 34% raised benefit age/service requirements, 28% increased employee contributions, 10% held or lengthened the amortization period to improve affordability, and 19% shortened the amortization period to improve funded status.
Retiring in a digital world
As more plans maximize their usage of technology, NCPERS found pension fund’s communication capabilities rarely changed since 2021.
Nine percent of plans added a mobile app for their members, while 69% built a website, 42% created a social media presence, 68% offered videoconferencing, 41% send emails to all their members, and 4% send mass text messages to their membership.
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