Industry News

On January 30, 2019, the National Conference of Public Employee Retirement Systems (NCPERS) announced the results of its 2018 NCPERS Public Retirement Systems Study.  The comprehensive survey provides information on investment experience, actuarial assumptions, plan administration and operations, trends, innovations and best practices.

The key findings include:

• During 2018, the average funding levels (the value of the assets in the pension plan divided by an actuarial measure of the pension obligation) increased slightly.  Average funding levels rose to 72.6% in 2018 from 71.4 in 2017.  Pension plans that responded in both 2017 and 2018 have an average funding level of 72.2%.
• In 2018, the average investment return assumption was 7.34% compared to 7.49% in 2017.  About 83% of responding funds reported that they have reduced their actuarial assumed rate of return or are considering doing so in the future.
• Amortization periods have shortened from 23.8 years to 22.4 years, and those with closed/fixed amortization have increased from 62% to 73%.
• Employer contribution rates remained stable at 22% of payroll in 2018.
• The funds experienced solid returns, close to or exceeding the assumed rate of return.  On average, 20-year returns were 7.2%, 5-year returns were 9.0%, and 1-year returns were 13.4%, significantly higher than 7.8% reported in 2017.
• Pension funds reduced the cost of administering funds and paying investment managers to 60 basis points (or 60 cents per $100 invested) versus 55 basis points in 2017.  This is near the average fee of 59 basis points for equity funds and 70 basis points average for hybrid funds. As a result, public funds with lower expenses provide a higher benefit level to members for each dollar invested and produce a higher economic impact for the communities where those members reside.
• In 2018, about 46% of plan sponsors offer a health plan or subsidy as compared with about 40% who offered a plan in 2017. Of those offering a plan, about 63% of active members are eligible, 98% of retirees are eligible, and 78% of beneficiaries are eligible.

The survey included 167 state and local government pension funds with more than 18.7 million active and retired members and total assets exceeding $2.5 trillion in actuarial assets and $2.6 trillion in market assets.  Of the pension funds surveyed, 62% were local government funds and 38% were state pension funds.

The report is available here.